I. Introduction
A. Framing the Problem
Types of aggregate proceedings
 1)aggregate lawsuit – single lawsuit that usually involves multiple claims and defenses held by multiple parties
and/or their representatives. Typical example: class action – maybe only single named P and D, but P may represents
many persons not technically before the ct (not joined and served w/process), but whose rights being adjudicated
 2)administrative aggregation – instead of a single lawsuit, separate but related lawsuits, brought together for the
purpose of jud. management. Ex. of MDL panel—authorized by statute to bring together separate cases that are
related in some way for pretrial proceedings in one-several fed. cts. 2 subcats:
o a)consolidation – packaging of separate lawsuits for adjudication. Lawsuits remain separate, but some
common adjudicator handles the proceeding
o b)coordination – lawsuits remain separate, but only pretrial proceedings handled by a single judge—like
MDL panel. For actual trial/adjudication, cases separated out and sent back to original district
 3)private/informal aggregation—multiple claims/defenses by multiple parties, but non-judicial supervision. Any kind
of coordination/mass treatment done by something other than jud. intervention/supervision.
o ex. - multiple Ps, happen to be represented by the same lawyer—who has an inventory of similar cases
brought against the same D(s). Technically separate cases, sep. judges, etc, but treatment of cases reflects
reality that single lawyer representing each side.
o ex. – lawyers representing separate but similar Ps pool materials, hold conferences to plot strategy, etc
 4)interpleader – in rem proceeding. Ct sets extent of party liability to other parties. Ex – D turns over prop. to ct for
purposes of suit, to determine how it should be distrib. amongst various contesting parties.
 5)bankruptcy – in rem proceeding, ct draws in all creds with claims against debtor, divides up its property
 6)parens patriae action – govy acting in capacity as protector of public health/safety/morals in civil context
History of Complex Litigation – Poss. def of complex lit. that it reqs. intensive jud. management to derive efficient
outcomes. Rulemaking retrospective – old probs. lead to current rules, which are interp., leading to problems when applied to
unforeseen probs. THEN: WWII-era concern about “protracted case” – prob. at the time is glut of antitrust cases. Spiraling
lit.costs, increasing complexity, etc. Other issue: multiple separate but related suits – risk of inconsistent judgments. Harder
for parties to plan conduct and undermines respect for justice system. Increase resources to meet first prob = increase
incidence of second prob. Solution= active jud. mgmt, centered around coordinating committees—leads to MDL panel
statute, mods to Rule 23, softening of preclusion rules NOW: complex cases ones that raise governance/org. probs. Many
rights holders, little indiv control. Many qs re: optimal participation lvls/procedures, class rep duties, exit voice, loyalty, etc
B. Preclusion
Imp. bc both claim-holders and Ds want global peace/closure Ct system wants to clear cases from docket. Procedures
designed to effectuate this desire.
issue preclusion – when an issue of fact or law is actually litigated and determined by a valid & final J, and the determination
is conclusive in a subsequent action b/w the parties, whether on the same or a diff claim.
Parlkane Hosiery Corp. v. Shore- J against Ds in SEC action says proxy statements misleading. Priv Ps want to invoke to
settle this issue in their lawsuits. Still must prove other elements of case. Practically, if Ps win this, Ds forced to settle. Dct
says no SJ, no jury in SEC case, 7th amend. prob. CoA revs – equitable proceeding, not at law, no jury right, already had
full/fair chance to litigate. SC ignores this, looks at mutuality doctrine – preclusion lim. to parties to prior J. Some sense of
fairness/equity to rule. Blonder-Tongue relaxed for circs where P loses v D1. DCE. D2-Dx can invoke prior J to prevent P
from relitigating issues it lost – prevent gaming/inefficient/inconsistent outcomes. Ps join all Ds in one proceeding. Ps argue
ONMCE on effic. grounds. Prob – might give incentives to Pn to sit out suits until one succeeds. RR accident hypo.
HOLDING: ONMCE fine, but lower cts have discretion: 1)whether Ps could have easily joined in prior cases. if P
could have easily joined, ct shouldn’t allow this 2)whether or not unfair to D – indicia of unfairness a)whether, in
prior case, some reason why D didn’t have incentive to litigate case fully/with all resources—minor case, etc.
Concern where no fully prior vetting. Ct looking at incentives to litigate fully in the first place. 3)whether ruling
consistent with other rulings---if confusion in holdings, can’t invoke///Ct doesn’t care abt jury trial, not kind of diff ct
thinks is imp., no imp. procedural advantage. ONMCE still gen. disfavored.
ALI § 1.01 and Comments and Illustrations
Taylor v. Sturgell – Vintage aircraft FOIA request. P1 loses at dist. ct & appeal, but didn’t contest 2 pt. P2 files same request
in diff dist. Govy seeks SJ under claim preclusion, says P2 “virtually represented” by P1 (friend of P2). CP=arises out of
same trans., prior J bars anything that was actually or could have been litigated in the prior case. Reqs. mutuality –need to be
party to prior J for CP to attach.
HOLDING: VR fine when 1) both the old and new parties have the same interests 2)adequate representation in the
first claim ---not clear what this means, varies by circuit. Usually has something to do with alignment of interests.
Also view that adeq. rep. some sort of notice idea—know about lit, interests aligned, perhaps adeq. rep. Somewhat

loose/amorphous 3)If have those 2, need 1 of remaining 3 factors: a)some close rel. b/w party to be bound and party
actually in prior lit. or b)sub. participation in lit. by party to be bound or c)tactical maneuvering (need clear evidence)
///Fine for CA – rules premised on VR.
6 EXCEPTIONS to non-party preclusion rules: 1)contractual agreement b/w parties – if party in lawsuit 2 agrees to
be bound by result in lawsuit 1 2)Substantive legal rels b/w person to be bound and party to judgment---ex.
succeeding owners of property, company, etc---actual privity, not just friends 3)In some lim circs—class actions,
suits brought by trustees, guardians, fiduciaries, if individual adeq. rep. by someone with the same interests who was
a party to the suit. Need to be acting in a rep. capacity forthrightly 4)Party assumed control over previous litigation.
Some influence not enough. Subrogation would work 5)Agency relationship—relitigation by proxy. This much more
specific to the litigation itself—legal relationship about the outsider being handed the baton by the party in the first
case—no preexisting substantive relationship outside of the litigation itself 6)In circs where there is a special
statutory scheme that expressly forecloses successive litigation by nonlitigants—ex. 9/11 victims fund, Bk and
probate proceedings—in rem proceedings. Ct has control over debtor’s property. Also, only those suits that can be
brought by the public at large/////VR diff – broader, more substantive/amorphous. Legal realism, but SC says DP
violation. Multi-factor balancing tests unstable, create uncertainty/more lit. Opp. ruling prob would only lead to more
inconsistent judgments, more lit. abt whether preclusion applies. Allowing this creates common law CAs—slip.
slope. Parklane – smaller universe of potential preclusion application. Formalistic opinion. Might argue FOIA
benefits public – but ct says dir. towards indivs, couched in terms of priv-rights – don’t make info public, and no ev.
of vexatious lit. Ppl won’t pursue loser cases. If stat. more public in nature, maybe diff outcome/diff preclusion rules.
TAKEAWAYS: Ct needs to have put protections in place to protect absent parties. Ds bear burden of CP defense—
even if facts suggestive in some way of agency rel.—not enough. Efficiency of CP insuff to justify this. Unclear
whether Const. decision – if so, applies in both fed & state cts. If not, state cts can ignore. DP cited, preclusion on
state law claims unclear. “Identity of interests” could be expansive, must be clear. Stare decisis principles can still
discourage relitigation, but can circumvent by filing elsewhere
C. An Overview of Aggregation Techniques
ALI § 1.02 and Comments and Illustrations
ALI § 1.04 and Comments
ALI § 1.05, Comments a & b, and Reporters’ Notes on Comment b
II. Class Actions: Creating a Class
A. The Stakes
For P:
Hansberry v. Lee- Racially restrictive covenant invoked in previous action invalid, but no fraud. Ap. ct says though
covenant factually hadn’t gone into effect, shouldn’t be able to relitigate this. Issue here is whether Ps can relitigate this even
though prior judgment a CA, and those that sold prop. to current Ps members of prop. owner class. Successors in interest,
though prev. owners not named Ps in prior case. HOLDING: No preclusive effect under DP clause of 14 th amendment. Need
commonality of interest/issues fairly rep. by parties litigating on behalf of class. Here, prop owners could’ve been on either
side, sometimes Ps, sometimes Ds – no suff. cohesion to constitute a class. Buying prop. doesn’t tell us much about the
interests of the party (double-sided interest). Odd flavor in opinion: group with too much autonomy abt right at issue can’t be
a class bc could be on either side of the “vs.” sign. Not a clear decision.
For D:
Rhone-Poulenc- Class of hemophiliacs who got AIDS from D’s blood products. Opt-out class. Common qs must
predominate over indiv. class diffs. Threshold lvl of cohesion. Dist. ct said too many indiv. causation issues, only cert. for
negligence issue. 23(c)(4) issues class. Indiv. cases use jud. decision as CE to stop Ds from relit. neg. issue. D would still
have spec. defenses for indiv. Ps. D seeks mandamus bc this may force them to settle. At time, rule 23 had no procedure for
pre trial interloc. appeal of cert. – had to wait for judgment to appeal. 2 writ of mandamus reqs (extraordinary measure):
a)ruling below exceeded bounds of jud discretion+b)irreparable harm. CoA allows/decerts. bc dislikes hybrid CA. 1)SoL for
these cases rapidly approaching, would limit # of eligible Ps. Also, Ds had already won 12/13 cases. Some cases also won’t
be brought bc of litigant autonomy, economic concerns, etc. CA changes economics of lit. Eisen said ct shouldn’t look at
merits of underlying claims in making cert decision (that ct cert. bc of perception that claims were strong). No meritspeeking. 2)Rational D might prefer CA to 1000 diff lawsuits, but variance of EV (Prob of winning x total loss) very high,
even though EV calc technically the same. Posner says dist ct ruling exceeded bounds of discretion insofar as made Ds
subject to single jury trial – pressure to settle. Clears ct dockets (good), but cert.=end of lawsuit, even though cases appear to
be losers. Value here potentially high enough that Ps will pursue claims on their own – seems inconsistent w/Posner’s
assertions that they are losers. Case ultimately settled on remand
- Notes – Rule 23(f) (interlocutory appeal) review approp. in 3 crics: 1)death-knell situation for either P or D that is
independent of the merits of the underlying claims, coupled with a questionable class cert decision by the dist ct,
w/respect for its discretion 2)when the cert decision presents an unsettled and fundamental issue of law relating to
class actions, that is likely to evade end-of-the-case review 3)when the dist ct’s class cert decision is manifestly
erroneous.
- Criticism here:1)Runs afoul of Eisen 2)Posner exaggerates implications of class treatment for Ds—issues-only class
ALI § 1.03 and Comments - Other things at stake in aggregating claims. aggregate to further pursuit of justice—use resources
efficiently, facilitate binding resolution, etc. Some forms of regulation that require grouping ppl together. Casebook makes
more explicit. Could have system where every ship on own bottom—get lawyer if want to sue. If we have that kind of
system, recognize that some times when harm goes unremedied, either bc some ppl unsophisticated, don’t have money to hire
lawyer, or for simply economic reasons—spread out over population, big loss, but not economically rational for one single
person to do this. If we care about this, have to move away from every ship has own bottom idea. Once we do, tradeoff
compromise amt of control each indiv exercises over the lit. Hobbes’ leviathan idea – at some pt, society reqs that we lose
some amt of indiv control for things to run smoothly. Aggreg. nec. for regulation/rights enforcement/efficiency.
 Pros/cons of aggreg.: - indiv Ps get rep. in cases they might not have brought or might not have been able to get
rep for on their own. Negative value claims esp. Even for non-neg value claims, cheaper to get class rep.than
indiv rep. Downsides: risk of preclusion, risk of having one’s claim destroyed, even though one has not had one’s
day in ct, and has had little or no control over the lit. of the interests bound up in the claim
B. The Mechanics: Class Certification
1. Overview
Federal Rule of Civil Procedure 23
(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members
only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact
common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class;
and (4) the representative parties will fairly and adequately protect the interests of the class.
(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if: (1) prosecuting separate
actions by or against individual class members would create a risk of: (A) inconsistent or varying adjudications with respect
to individual class members that would establish incompatible standards of conduct for the party opposing the class; or
(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of
the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect
their interests; (2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that
final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or (3) the court finds
that the questions of law or fact common to class members predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.
The matters pertinent to these findings include: (A) the class members' interests in individually controlling the prosecution or
defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against
class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
(c) Certification Order; Notice to Class Members; Judgment; Issues Classes; Subclasses. (1) Certification Order. (A)
Time to Issue. At an early practicable time after a person sues or is sued as a class representative, the court must determine by
order whether to certify the action as a class action. (B) Defining the Class; Appointing Class Counsel. An order that certifies
a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g).
(C) Altering or Amending the Order. An order that grants or denies class certification may be altered or amended before final
judgment. [As originally enacted in 1966, Rule 23(c)(1) provided that: ―As soon as practicable after the commencement of
an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this
subdivision may be conditional, and may be altered or amended before the decision on the merits.‖] (2) Notice. (A) For (b)(1)
or (b)(2) Classes. For any class certified under Rule 23(b)(1) or (b)(2), the court may direct appropriate notice to the class.
(B) For (b)(3) Classes. For any class certified under Rule 23(b)(3), the court must direct to class members the best notice that
is practicable under the circumstances, including individual notice to all members who can be identified through reasonable
effort. The notice must clearly and concisely state in plain, easily understood language: (i) the nature of the action; (ii) the
definition of the class certified; (iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance
through an attorney if the member so desires; (v) that the court will exclude from the class any member who requests
exclusion; (vi) the time and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members
under Rule 23(c)(3). (3) Judgment. Whether or not favorable to the class, the judgment in a class action must:
(A) for any class certified under Rule 23(b)(1) or (b)(2), include and describe those whom the court finds to be class
members; and (B) for any class certified under Rule 23(b)(3), include and specify or describe those to whom the Rule
23(c)(2) notice was directed, who have not requested exclusion, and whom the court finds to be class members. (4)
Particular Issues. When appropriate, an action may be brought or maintained as a class action with respect to particular
issues. (5) Subclasses. When appropriate, a class may be divided into subclasses that are each treated as a class under this
rule. [Prior to the 2007 restyling, what now appears as subsections (c)(4) and (c)(5) of the rule appeared as subsections
(c)(4)(A) and (c)(4)(B), respectively.]
(d) Conducting the Action. (1) In General. In conducting an action under this rule, the court may issue orders that: (A)
determine the course of proceedings or prescribe measures to prevent undue repetition or complication in presenting evidence
or argument; (B) require – to protect class members and fairly conduct the action – giving appropriate notice to some or all
class members of: (i) any step in the action; (ii) the proposed extent of the judgment; or (iii) the members' opportunity to
signify whether they consider the representation fair and adequate, to intervene and present claims or defenses, or to
otherwise come into the action; (C) impose conditions on the representative parties or on intervenors; (D) require that the
pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly;
or (E) deal with similar procedural matters. (2) Combining and Amending Orders. An order under Rule 23(d)(1) may be
altered or amended from time to time and may be combined with an order under Rule 16.
(e) Settlement, Voluntary Dismissal, or Compromise. The claims, issues, or defenses of a certified class may be settled,
voluntarily dismissed, or compromised only with the court's approval. The following procedures apply to a proposed
settlement, voluntary dismissal, or compromise: (1) The court must direct notice in a reasonable manner to all class members
who would be bound by the proposal. (2) If the proposal would bind class members, the court may approve it only after a
hearing and on finding that it is fair, reasonable, and adequate. (3) The parties seeking approval must file a statement
identifying any agreement made in connection with the proposal. (4) If the class action was previously certified under Rule
23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual
class members who had an earlier opportunity to request exclusion but did not do so. (5) Any class member may object to the
proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court's
approval. [As originally enacted, Rule 23(e) provided simply that: ―A class action shall not be dismissed or compromised
without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the
class in such manner as the court directs.
(f) Appeals. A court of appeals may permit an appeal from an order granting or denying class-action certification under this
rule if a petition for permission to appeal is filed with the circuit clerk within 10 days after the order is entered. An appeal
does not stay proceedings in the district court unless the district judge or the court of appeals so orders.
[As originally enacted, Rule 23 contained no discussion of appeals from district court class certification orders.]
(g) Class Counsel. (1) Appointing Class Counsel. Unless a statute provides otherwise, a court that certifies a class must
appoint class counsel. In appointing class counsel, the court: (A) must consider: (i) the work counsel has done in identifying
or investigating potential claims in the action; (ii) counsel's experience in handling class actions, other complex litigation, and
the types of claims asserted in the action; (iii) counsel's knowledge of the applicable law; and (iv) the resources that counsel
will commit to representing the class; (B) may consider any other matter pertinent to counsel's ability to fairly and adequately
represent the interests of the class; (C) may order potential class counsel to provide information on any subject pertinent to
the appointment and to propose terms for attorney's fees and nontaxable costs; (D) may include in the appointing order
provisions about the award of attorney's fees or nontaxable costs under Rule 23(h); and (E) may make further orders in
connection with the appointment. (2) Standard for Appointing Class Counsel. When one applicant seeks appointment as
class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4). If more than
one adequate applicant seeks appointment, the court must appoint the applicant best able to represent the interests of the
class. (3) Interim Counsel. The court may designate interim counsel to act on behalf of a putative class before determining
whether to certify the action as a class action. (4) Duty of Class Counsel. Class counsel must fairly and adequately represent
the interests of the class. [As originally enacted, Rule 23 contained no discussion of class counsel.]
(h) Attorney's Fees and Nontaxable Costs. In a certified class action, the court may award reasonable attorney's fees and
nontaxable costs that are authorized by law or by the parties' agreement. The following procedures apply:
(1) A claim for an award must be made by motion under Rule 54(d)(2), subject to the provisions of this subdivision (h), at a
time the court sets. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class
members in a reasonable manner. (2) A class member, or a party from whom payment is sought, may object to the motion.
(3) The court may hold a hearing and must find the facts and state its legal conclusions under Rule 52(a). (4) The court may
refer issues related to the amount of the award to a special master or a magistrate judge, as provided in Rule 54(d)(2)(D). [As
originally enacted, Rule 23 contained no discussion of attorney‘s fee awards.]
RULE 42 – (a) Consolidation. When actions involving a common question of law or fact are pending before the court, it
may order a joint hearing or trial of any or all matters at issue in the actions; it may order all the actions consolidated; and it
may make such orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.
2. Numerosity
- Gen rule, once up to 40 members, fine, but class actions with 25 members. Raw numbers not as imp—really about
impracticability of joinder. Fed rules 19-20, govern joinder in fed system—easy to join lots of Ps or Ds—what’s so
impractical? Parties joined still must be found, served with process. Members of lit may die in litigation, esp. in tort
cases w/ppl gravely injured—estates substituted, etc—gets messy.
3. Commonality and Typicality
- Cts often treat these concepts interchangeably. Need common issue of law or fact – and typically more than that –
need identity in interests. Always some diffs b/w reps and class, key is diffs that matter for adjudication of interests –
not insig. ones. 23(a)(2) comm. req one of “minimal commonality”—as opposed to 23(b)(3) – (predominance req)
Falcon – Named P sues after allegedly passed over for promotions due to racism. Class comprised of both current employees
that faced sim. discrim. and those that applied for jobs and were denied. D challenges cert, CoA affirms using “across the
board rule” for employment discrim. suits – since suffered “essentially the same injury”—albeit from diff discrim. practices.
1)SC concerned – allowing this breaks down formal reqs of rule 23 – nothing special abt title VII that overrides gen. rules for
CAs. Imp. to maintain uniformity and constrain CA mechanism power 2)Across board rule not nec. always good for Ps – can
have negative preclusive effect if class loses, and greater risk of this when class rep. doesn’t share intertwined interest(s) with
class (even though lawyers doing representing). Manageability issues – bringing divergent claims at once—might also
contaminate things with jury either way (weaken strong ones, strengthen weak ones). May make sense to have as much
linkage as poss between a named rep. and class members 3)McK: who cares, cases always settle. Cong. intent to provide
exception to rule 23 for EEOC, not priv. litigants – deferring to leg. judgment. EEOC=govy reg./parens patriae. Cts more
uncomfortable with this when priv parties doing regulating/cts governing – inst. competence/propriety concerns 4)Stevens
notes that typicality/adequacy of rep/common. all merge – 23(a) reqs guideposts to determining whether maintaining class
economical (num./comm.) , whether named P’s interests so interrelated w/class that ad. rep., and concerns abt class counsel.
Smell test, hang particulars on partic 23(a) cats. 4)Characterize claim as race-based discrim., cert. fine. But take down lvl of
generality – 2 groups have diff. grievances
ALI § 2.01 and Comments and Illustrations
ALI § 2.02 and Comments a, b, f, g, & j
4. Adequate Representation
- Sim. to comm./typicality. Focus on P/class counsel – a)are they qualified? b)do they have any conflicts of interest?
III. The Types of Classes
A. The Opt-Out Class
1. Due Process
- Hirschman ideas about consumer societies. Ways of giving feedback over way org. run – voice, ability to leave –
imp. bc litigant autonomy thought to include ability/right to pick up and move on/do what want with rights. Fear of
collective in American society.
Shutts – Oil/gas corp. leases land rights, pays royalties, but insuff. Tons of smallish claims. Ps sue in KS – forum shopping
for favorable laws. Most apt places to bring suit both have unfav. laws. One named P from KS. Ds argue: 1)Ps have no min
contacts w/KS (as per International Shoe). 14th Amend. DP prob – can’t enter J w/out PJ, no FFC for such a J 2)KS cts erred
in applying KS law to entire case, though most class members have no ties to state—DP protection against arbitrariness in
decision-making
HOLDING: 1)Liberty interest meant to protect against harassment/expense of litigating out-of-state/poss of paying
for adverse J. Not same burden for Ps. Theoretically could have to participate in discovery, but unlikely. Not req. to
do anything, and have rights vindicated. Poss. bound by decision, but have opt-out right. PJ about burdens of
litigating 2)Opt-out prov. more likely to lead to a viable organization than an opt-in org.—would lead to fewer viable
class actions and would also be more protective of rights of absent class members – who would’ve manifested their
affirmative consent to be part of org. But Const. about min. acceptable, not best. Ct also defers to judgment of
political actors that reg. interest be furthered by allowing more CAs 3)Decision lim. to dmgs. If equitable action or
lim. fund, don’t need opt-out. Risks to ppl in class. Assumption that such actions more likely to involve claims that
are indivisible, where D conduct can only be reg. w/any kind of clarity by a single form of J. Danger of inconst. Js
4)State law arg. valid – remands. Unfair not to do comparative law inquiry, need sig./aggreg. contacts. 4)This case
stands for external governance concerns with CAs– CA used as reg. device. Inapprop. for KS to impose own law on
rest of country without careful analysis-aggrandizing power to KS at expense of other states. On remand, KS ct finds
KS law approp. Effects of cavalier choice-of-law analysis important 5)When state cts resolving sweeping claims,
must do analysis of choice of law as part of FF&C
2. Predominance and Superiority – 23(b)(3)
- all abt efficiency/manageability – 4 guideposts listed
Amchem – Prepackaged settlement class to give resolution in asbestos context (10s of 1000s of cases, many Bks, etc). MDL
xferred all pending cases (inventory claims) to single dist ct (no auth. over unfiled cases). Consortium of Ds willing to settle,
but want global peace. Settlement calls for 4 diff. classes of Ps with diff payouts – grid arrangement. Admin. panel handles
conflicts over comp. for indiv. claimants. Some claims, including med. monitoring and fear of future cancer excluded. Ds
waive potential SoL defenses, some liab. P atty firm here not at table during negotiation, not getting paid, challenges
settlement at fairness hearing (21(e))—ensure resolution of CA not just a matter of private ordering (concerns abt collusion
and rev. auction). PROBS: 1)no subclasses, no separate rep. Arg. that lawyers rep. inventory claims shouldn’t represent
future class—worry selling preclusion. Grid not adjusted for inflation—current and future claimants have diff interests.
Inflation fear 2)23(b)(3) predominance problem/manageability issues – state law variance, diff exposure periods, diff
products, etc. Settlement only class, do these reqs matter? SC says less concern bc of settlement, don’t really need to discuss
what trial would look like for predom/superiority, though still relevant (3d cir said didn’t change things at all). Structurally
unwieldy 3)Concerns abt internal governance – not cohesive enough, shades of Hansberry, those leading class’ interests not
same as class (a la Falcon). Legitimacy concerns w/placing disparate Ps in same class & raises choice of law issues. Also
autonomy concern – not neg. value claims here, and class treatment would subsume claimant autonomy to group, even high
value indiv claims that could be brought separately. Real legitimacy concern abt self-dealing by lawyers & collusion.
Suggestions that okay to have such a structure if claims can’t be brought on own – neg. value claims, but not at issue here.
Concern selling global peace at expense of future claimants 4)Externally – ct says looks too much like legislation –
grid+admin dispute resolution process = worker’s comp scheme 5)McK says subclasses would bring more cohesiveness, but
still predominance issues. Also poss Const. concerns – lack of adeq. notice (Mullane standard is measures reasonably calc. to
give notice) 6)Breyer dissent – realist critique – fact-bound decision, leave to dist ct. Advocates strong deference. Concern
abt protracted case – best claims not guaranteed to be paid bc of volume, delay, arbitrariness. Ds waiving CP, SoL, and other
defenses. Substantively, good compromise deal guarantees payment for injured Ps. Always going to be diffs in classes, have
to pick lvl of generality—no legitimacy concern here. Ds waiving defenses, so choice of law diffs irrel. bc of settlement,
though theoretically problematic 7)No subclasses here bc more subclasses, higher trans. costs of settlement – more lawyer,
might blow up the deal. Balance b/w min. number of subclasses needed to avoid Anchem result and not one more 8)Phenfen
cases after this suggest settlement classes still possible – need better notice provs, etc 9)Present v future interests – desire diff.
forms of payment, diff. trust/fund structure, interest, etc 10)Bigger legitimacy concern: SC doesn’t trust dist cts to undertake
mass resolution-- looks like leg., and thus illegitimate for cts to do this, even though tech. possible under rules—too inventive
Ortiz – Another attempt at mass resolution of asbestos lit. P attys opt for lim. fund theory so as to sustain mandatory class.
SC shoots down. a)skeptical that mandatory class treatment appropriate – class not inclusive enough b)fairness of settlement
– no account taken of temporal division b/w present and future claimants/based on when a partic P’s claims arose.
3. Future Claimants
Stephenson v. Dow Chemical Co. – Agent orange case. Settlement calls for fund w/reserve for future claimants, but with
fixed endpoint. Ds want explicit lim. on liability. This a coll. attack on claim preclusive effect of settlement on grounds future
claimants not adeq. rep. in orig. case (no reps. for these parties in orig. case). View that orig. settlement fav. to Ps (bolstered
by contemp. scientific ev.—later undercut). Ct conscientiously reviewed decision for reasonableness, but these claimants had
no reps at prior settlement—might have modified its terms. Instant ct vacates and remands – allows this case to continue bc
Ps were inadequately represented 1)McK says case represents formalistic attention to details of internal class structure –
result would’ve been the same at the time (thought to be weak claims/generous settlement), even with representatives for
future claimants. Ds likely wouldn’t settle without globalpeace, and waiving decent defenses here – mil. contractor defense,
etc. Prob. same result 2)Going forward, if class w/present and future claims, split them up so as to avoid ex post coll. attack
3)Ds typically only care abt total comp. to Ps/endpoint for liab., but if concerned with viability, may pipe up abt this 4)SC
split 4/4 on case, no precedential effect for case 5)Case filed after anchem, take lead from it
Uhl v. TTT- RR wants to install telecom cables along RR right of ways. Prop. owners argue RoWs limited, seek comp. Class
all homeowners who own prop on both sides of RoW. One class rep. Objectors complain, but random chance what side of
track cables laid on. One side gets more, but class rep. can’t know which side he is on until after lit. resolved. Veil of
ignorance idea – everyone has same incentives, could be on either side. Subclasses not always nec., esp when subclasses
indistinguishable 1)McK: rule 23 reqs some attention to merits when determining how much intrusion onto litigant autonomy
is permitted. Arguably allow more intrusion where value of claim lower 2)Facts here unusual – won’t arise in most circs
4. Choice of Law
- State cts care, SC doesn’t. CAs bring more attention to issues
- Fed cts must analyze this when deciding whether predom./sup. reqs met. Too disparate = no class
- 3 tests: 1)vested rights test – J in which right/interest vested is whose law should apply – where K formed or tort
occurred or prop. located 2)Significant relationship test (2nd Rst) – NY/other cts – many factors – agg. contacts in lit,
policy interests of Js. Crit. is too vague—too much balancing, can lead to judge’s desired result 3)interests test –
more straightforward, touchstone is quality of contacts. Forum applies own law unless this would impair policies of
another J w/a superior int. in having its own law apply to the lit.
- Klaxon rule – fed ct sitting in diversity must apply state law rules in J in which it sits – issues for rule 23 cases
- main concerns w/choice of law are manageability and adequacy of rep. Choice of law Qs may make case too hard
to adjudicate. 2 probs: a)substance of law that must be applied after the requisite choice of law analysis is inimical to
class treatment b)after becomes clear that multiple substantive laws must be applied, robs class of cohesiveness or
reqs too much subsidiary adjudication within the class. Cole an example of 1st, bridgestone/firestone an ex of the
second
Cole v. General Motors Corp.- Claimed defect in car airbags, Ps seek reduction of purchase/lease price of cars. Class cert.
challenged under 23(f) interlocutory appeal for conflict of laws probs. P says UCC applies in all states, thus no prob. D
agrees, but argues too many other issues. Textually similar, but diff. interps of sales law in various J, esp. for proving
reliance. Could divide up class and have mini-trials, but if that many, CA mechanism not sup. Would render CA as
aggregation of lots of mini-trials. Too individualized here. If not individualized and can treat class as whole, fine. Class
decert. 1)Can’t have 51 subclasses here bc in some Js, reliance must be proved on indiv. basis 2)P lawyers hate subclasses –
more competition amongst lawyers for fees. Economics of CA mechanism make less sense. Single counsel = greater
economies of scale, greater recovery for P lawyers 3)No remand here bc would have same result as Shutts. Order to decert
4)If indiv Qs swamp common Qs, can’t satisfy 23(b)(3) reqs. Underlying law here reqs. too much consid. of indiv. issues
In re Bridgestone/Firestone, Inc. Tires – Dist. ct certs class comprised of owners of cars using various types of tires and
owners of certain vehicles claims to cause excessive rollovers for which there are concerns about tire blowouts and accidents.
Ps sue for comp. for risk of tire failure, decreased resale value of cars, mental anguish. D ct finds under IN choice of law
principles, law of D’s home state applies—where products designed, decisions made. MI class for car claims, TN for tire
claims D brings interloc. app. under 23(f) 1)CoA says Dist ct did analysis, but wrong – follow law of separate states (where
Ps located—50 diff states), not home base rule. At that point, CA unwieldy, decerts. 2)Points out rule ridic – IN wouldn’t
apply Korean law to case involving Hyundai 3)Odd switch here – outside CA context, Ps want own consumer prot. laws, and
Ds want law of home state. P lawyers know class not viable if home state of every consumer sets law to be applied to them
4)Unanswered Q here – even if law of 50 states applies, might be that of 50 states, 40 have maj. rule, 10 have min rule – then
just 2 rules, choice of law not as burdensome, CA not as unwieldy
5. Manageability
- 23(b)(3) – 4 guideposts for determining whether sup./predom. satisfied. Guideposts touch on manageability
concerns, which are focused on whether easy, possible, advisable to adjudicate claims/defenses through agg. in a CA.
“Include” indicates this is a non-exhaustive list of concerns that bear on predom./sup.
- 23(b)(3)(D) – manageability concern – “likely difficulties in the managing of a class action”
In re Domestic Air – Antitrust CA alleges airlines conspired not to compete with one another when flying out of their hubs.
No predominance issues here, D issues predominate. Ds claim CA not sup. method of resolution – millions of class
members/transactions, will req. tons of trials w/respect to indiv. class members. Dist ct. certs 1)superiority Q is
comparative—is CA superior to other forms of adjudication? Many neg. value claims here, wouldn’t be brought at all
otherwise – good for Ds/dockets, but not if Ds violated antitrust laws. Not making J abt merits of claims—assume claims
winners, but not econ. viable to bring separately. To extent trying to hold Ds accountable for misconduct, CA superior – this
or nothing. Judges should consider litigant autonomy when determining predom/sup. 2)Data/computers can be used to avoid
indiv. dmg trials. Ps smart – present plan of attack for calcing dmgs in formulaic manner – generate grid to comp. claimants.
If had to do minitrials w/lots of ct attention, would suggest CA unmanageable. 3)Ds say indiv notice imposs, but Mullane test
is best notice practicable under circs – doesn’t always mean individualized notice. Ct says fine, reserves right to create
subclasses/separate masters later, but allows to go forward 4)Implicit in ct’s reservation of powers to change mind in future
the idea that manageability a compromise – permissible for case to go forward while also preserving flexibility for a plan of
attack down the road. Nothing in rule 23 prevents this – do not have to have a coherent plan of attack at the beginning of a
case under this rule 5)Even if diffs b/w Ps, suggestion here doesn’t defeat CA. Individ. aspect might be dealt w/using
straightforward ajud.
Hilao – Alien Torts Claim Act – aliens can sue in fed ct for violations of law of nations or US treaties. Passed 18th cent.,
dormant till late 20th cent. Bifurcated liab. & dmgs determinations. Jury trial on liab, then dmgs trial (bifurcated into comp. &
pun. dmg determinations). Dmgs set by statistical sampling. Special master appointed, conducts interviews. Statistics expert
says based on random sampling of claims, can get determination on 95% certainty lvl – no need to sift through all claims, just
137. 131/137 valid, apply 5% invalidity rule to entire class – discount to D’s total comp. liab. D challenges under DP 1)D
Estate only cares abt total dmgs, not whether inequity for indiv. Ps—treated as agg. for estate purposes 2)Ct invokes
Matthews v. Eldrige test – when have DP challenge to some aspect of claim, balance private interest affected, interest on
other side seeking to use method, and due regard for govy’s interest/interest of parties in using some other procedure.
Balancing here – state doesn’t care either way, just wants total dollar amt, Ps have strong interest in proceeding this way, so
does ct, so fine 3)What if P objected, torture victim, said subclass not adeq. rep.? This method has poss risk of error from
indiv. class member’s perspective – though will generate good EV over lots of adjuds. Ct not concerned here, bc Ps opted-in
– not req. to participate. Notice+opt-in alleviates concerns abt fairness of stat. allocation of dmgs. Ps free to proceed on own
4)Case shows how ct dealing with manageability concerns can overcome them. First seps. out classwide issues that can be
determined upfront, then uses spec. master to consider aspect of case – comp. dmgs, that req. indiv. determinations 5)Stat.
sampling very controversial –jury here overrides some of spec. master’s determs. CoA fine bc thinks spc. master did
conscientious job, and jury conscientious in checking him 6)3 ways to see case, from a)D persp. b)P persp. c)Ct persp. D
perspective, shouldn’t care abt indiv determs., just that award right. P persp, allocations do matter, but opt-in for final stage of
proceedings, where spec. master determines dmgs, lessens concerns. Ct: fed cts routinely handle complex cases, no
manageability concerns. Not very adventurous
6. Challenging Class Certification
Klay v. Humana – Seen as ideal handling of CA. P doctors sue HMOs, alleging conspiracy to underpay. Fed/state law
claims. Fed claims RICO, has both crim & civil elements. 2 reqs: a)unlawful RICO enterprise –org. of parties alleged to be
breaking law b)pattern of racketeering activity/unlawful D conduct. Here, alleged wire, mail fraud, extortion—catch-alls.
Reliance standard element of misrep. claim, but mail/wire fraud claims for RICO purposes don’t turn on knowledge/conduct
of indiv class members, focus is on Ds, not P knowledge 1)Ct fine w/inferring reliance from D conduct – ex. promising to
pay and don’t fully comp. Reas. person would rely on that 2)Ct also says dmgs mechanical – not subjective. Use computers
3)Ct rejects choice of law challenge – claims turn on state law, but patterns among diff states, and Ds don’t show any real
diffs among state K laws 4)Second choice of law issue – K law applied will req. too many fact-specific, indiv. determinations
abt whether Ks breached 5)Case reps. recent turn by Ps – use RICO instead of K laws – avoid choice of law concerns/prob.
of indiv. reliance, bc cts have tended to adopt reasoning put forth by 11th cir here. SC in Bridge confirms that no rel. element
in civil RICO actions 6)Ct rejects 2 challenges to class cert that implicitly turn on 3rd factor in 23(b)(3) – desirability of conc.
lit. in one forum. Ds say immature tort (Castano an ex. where ct says in order to cert, need to know how case will play out—
too many manageability issues for new torts). 11 cir rejects, says cases won’t be brought on own, too complicated/expensive
for indivs. – won’t get any more clarification than we already have. Claim economics preclude fleshing out track record like
Castano says is nec. Ct also shoots down notion that class structure too coercive—too much pressure to settle – ct shouldn’t
decide fate of entire HMO industry. Concern not explicitly in rule 23, but stems from 23(b)3) desirability of forum factor.
11th cir properly rejects 7)Ct basically revs. Anchem – some cases big, some small. You want special protection for industry,
go to Cong. to leg., cts won’t do that 8)Ct does creative remaking of Rome-Polanque – no interloc. appeal at time, but 23(f)
enacted, allows this. No gun to the D head now from class cert. Economics of CA don’t change, but in narrow doctrinal
sense, concerns obviated by 23(f) 8)Ct says predom. analysis under 23(b)(3) has huge impact on sup. analysis. More predom.
issues, better chance of sup. forum.
B. The Mandatory Class – 23(b)(1-2)
- Cts typically blend 23(b)(1) and 23(b)(2) categories together. 23(b)(3) opt-out class separate
1. Overview
ALI § 2.08 and Comments c, h, i, & k
2. Indivisible Claims
ALI § 2.04 and Comments a & b
Brown v. Ticor Title Insurance Co. – Title fixing action. Ps orig. want monetary relief+injunction. Settlement gives injunc.,
change ins. policies allegedly affected by unlawful activity, atty fees+costs. No money. Member first class brings subsequent
suit for money. Preclusion? 1)Violation of DP to extinguish P dmg claims through mandatory action. Ct cites Shutts fn #3 –
when have dmgs class, opt-out req to satisfy DP minima. Need opt out if action wholly or “predominately” for money dmgs.
Settlement gave purely eq. relief, but had been sub. dmg claims, and foreclosed by settlement. 9th cir says action purely for
money dmgs 2)Clear concerns here abt loyalty of attys repping class – kick money dmgs to curb to benefit themselves. 2nd
action lawyers pled this pt well 3)What’s special abt money dmgs that reqs opt out? Pun. effects of money dmgs. Money
dmgs also retrospective –diff policy-wise from injunctive relief, which is prospective 4)SC grants cert, then dismisses (digs)
– rule 23 qs waived, ct doesn’t want to deal with poss Const. qs when unnec. and unwise to do when whole case isn’t before
ct. SOC, Kennedy, WR dissent, appalled that no preclusion here 5)McK says not clear case rightly decided, but interesting Q
– why did Shutts ct think money dmgs so special that opt-out req for money dmg actions but not others? 6)Operative Q here
one of preclusion. Ct draws line b/w law/equity. Opt-out right w/respect to dmg claims. Theory of case: can’t destroy right to
bring dmgs action w/out giving class member chance to leave. ALI says div b/w law/equity not so sancosanct—operative
distinction is claims that allege indiv claims that can be agg. and claims that implicate group injuries, for which indivisible
remedies appropriate—when injuries common to an entire class based on a discrim pattern/practice for ex – where relief
cannot be divided amongst members of a class. Dmgs – indiv class member shown to have separable entitlement
Barnes v. American Tobacco Co. – Named Ps all PA residents, sue tobacco corps. on behalf of 1 mill PA cig. smokers,
asking for various forms of relief for addiction to nicotine. Want cert. under 23(b)(2). Dist ct rejects (says 23(b)(3) not
approp. for cert. either). Ps want 3 things, including ct supervised med monitoring, funded by Ds. 3rd cir shoots this down bc
indiv. issues not predominating. Standard understanding of med. monitoring – ct supervised = eq. relief. Paid to Ps = dmgs.
From D perspective, doesn’t care. Ps clever, try to make this look like equitable relief for indivisible harm 1)prob – ct says
everyone must prove addiction, though Ps dispute that this is element of claim 2)regime not uniform – diff ppl have diff
needs that req indiv. determination—all dependent on lvl of exposure, which is not uniform for class. may also be indiv
defenses – assumption of risk, consent, SoL, etc, all of which turn on indiv, not class. Med monitoring under these circs not
indivisible. If remedy is divisible, can’t be maintained under 23(b)(2) 3)Maybe class composed of PA residents exposed to
cig. smoke – not nec. smokers. No more consent or AoR probs, etc. Some med. monitoring claim might escape this ruling
4)Taking up lvl of generality, might say harm here is increased exposure to morbidity risk – which seems indivisible. McK
says opinion may go too far – basically say no way for med. monitoring claim to satisfy mand. class regs. ALI illustrations
suggest ct-supervised med monitoring fine – why not take survey, etc – not onerous. Why not treat this on classwide mand.
basis? 5)Case makes clear that req for some basic lvl of class cohesiveness not limited to opt-out classes. Mandatory classes
to adhere to rule that indiv issues must clearly be subordinated to some common unifying trait that binds class together.
Might even req greater lvl of cohesiveness above that of opt-out classes. Too many individ. determs. req here, though better
lawyering might have changed outcome.
Allison v. Citgo Petroleum Corp. – Title VII CA & 42 USC 1981 – prohibits race-based discrim. in employment. 2 claims –
a)disp. impact (no intent—facially neutral claims have discrim. effects) b)disp. treatment claims – straightforward discrim.
based on alleged unlawful conduct. Old: Title VII puzzle, permitted some forms of “make whole” relief – idea that relief
granted not comp. or punishment, but ancillary to injunctive/other forms of eq. relief. Put class in position would’ve been but
for unlawful conduct. Cts claim not really dmgs. New: Cong changes civ. rights act, throws in provs. for outright comp.+pun
dmgs – explicitly called dmgs, and juries can award more than permissible before this pt. 5th cir says expansion of relief
means harder to have mandatory class treatment. Money cannot predom. over other forms of relief 1)Money dmgs predom.
unless incidental, and claims/relief flow to class as a whole 2)Cts call backpay equitable, though req indiv determination
(Pettway). Perhaps diff is one of ease of proof – just records, comps. can give answers. D has no individualized defenses or
contestable issues for Ps. Indiv determs., but merits of indiv. determs. not individ. Automatic calculation. 3)5 th cir says pun.
dmgs+comp. post 1991 are diff – did req. that kind of indiv. determ. Pretzel logic, but ALI drafters clarify – law v. equity
dist. slippery. Ds can’t really contest causation - once liab. found, relief ordered on classwide basis, everything flows from
that. 5th cir didn’t deal with this pragmatically 4)Suggestion that employment discrim. now rare—don’t need blunt instrument
of mand. CA anymore—criticized 5)Both sides can now request jury trial 6)Ct decerts, says abuse of discretion to cert.
mandatory class under circs where Ps asking for more than just backpay, but also comp+pun dmgs 6)Can have hybrid class,
provides for mand. treatment for part that is indivisible, opt out for divisible part. Does happen in practice, but harder to settle
– P lawyer can’t guarantee D global peace
3. Claims Against a Limited Fund
- 2 deeper reasons for this mandatory device: 1)cases in which no distribution could be made if an absent class
member could come along and sue – ex. dividing up admiralty awards for sailors. Can’t distribute equitably unless
everyone at table 2)last person standing could demand top dollar for the privilege of bringing that person into the
lawsuit, so that resolution of the claims could be finalized. Fear of the holdout, forced mandatory treatment. Cannot
be equitable distrib unless everyone forced to be at the table
Ortiz v. Fibreboard Corp. – 3 way lit: insurers v. personal injury Ps v. fibreboard. Attempt to use mand. CA to settle
asbestos mess. Corp gives struc. settlements – some money upfront, rest contingent on case v. insurers. Later settlements
entirely contingent on ins. settlement. Values settlements at x, but gives entitlement to 2x amt for ins. claim. Either 50/50
chance of winning lit, or case expected to go on forever, so 100K claim = 50K PV. Parties claim lim fund bc of amt of ins.
will form fund—corp not throwing in any equity. Corp/ins. wants total peace, no unknown future liabs –why pushing for
mandatory class, but settlement only covers 2/3 of potential class members. Argument here that mandatory class treatment
permitted bc w/out it, indiv cases would destroy fund created by settlement – poss of inequit. or no distrib. for class members
if allow indiv suits 1)Ct says fact that 1/3 of potential class members excluded casts doubt on notion that mand. treatment ok,
but who cares? Any class arb. on some lvl, but we care abt equity – can’t pick group post-hoc to be mandatory class—mand.
class defined by interests that preexist the existence of the class itself 2)Souter doesn’t think truly lim. fund – not suff for
parties to agree to lim. fund, must prove it. Evidentiary Q. Only need mand. class treatment here if need to get everyone
around table to make eq. distribs. If can’t show that, suggests that mand. class treatment inapprop 3)Historically, lim fund
cases did not allow D opp. to benefit itself – allow parties to define fund, allows D to shield some of its potential assets. Also,
must be commonality among class members that leads to getting everyone around table to treaty equitably—can’t be the case
that could divide up the class 4)Ct really angry bc doesn’t think parties neg. fairly here. Attys in first action here—have extra
incentive to get ins. corps to settle—may screw litigants who were not part of 1st settlement. Isn’t global peace better for
society writ large? Sense that no preexisting rel bw lawyers doing settling and class—simply assumed resp. for governing
this class. SC doesn’t want to depart from historic understanding of mand. lim fund CAs 5)Breyer more of a realist than
Souter (ideological purist) – doesn’t matter whether deal seems good in the abstract, rules followed. Alt. is more acrimonious
lit. that detracts from Ps’ ultimate awards 6)Souter says fact corp maintaining equity = inequitable. Violate ab. priority rule in
Bk. Suggests can’t use mand. class like this – Bk case = lim. fund – claims outstrip assets – forces everyone around table—
since this is basically a Bk situation, can’t let equity get more using mand. CA than in Bk. Makes sense unless we consider
that what wold drive corp into Bk are lit. trans. costs. Corp not saving equity for selves, saving it from lawyers—actual tort
creds wouldn’t nec get more money 7)Internal CA concerns abt how class structured and lawyer loyalty. External concerns –
Souter pts to BK521(g), asks whether cts should be undertaking this kind of global resolution outside Bk when Cong. has
blessed the Bk route 8)SUMMARY: Internal concerns - Case basically Anchem but for non-opt-out classes—lim fund
claimed on ground lim fund of ins. payments to comp Ps. SC revs class cert for 2 main reasons a)inclusiveness of class
(excludes lots of potential Ps, those with pending claims and inventory claims settled before this lit—depleted pool of poss
Ps) b)fairness of distrib – settlement fails both. Third issue – influential for later mass tort practice – parties claim lim fund,
but need to show a)some way of computing total claims b)some way of calcing fund upper limit. Parties don’t show either--lim fund mand CAs don’t work unless otherwise unable to grant relief to Ps unless all are at table—need to show truly lim.
fund. Also, this settlement K-ing around Bk priority rules – if corp insolvent, equity-holders should be wiped out. But why
not allow K arrangement that would preserve money and use it to keep corp as going concern/pay off victims? Value in
settlement may be higher than Bk value (due to lawyer+ct costs+longer process) Final internal concern – lawyers throwing
preclusion with other Ps in bc lawyers need global peace to induce Ds to settle and be paid for prev settlements (contingent
on outcome here). Future claimants worse off and reverse auction concern, and mand. class – no exit for Ps. 9)External
governance concerns – wariness of lower cts crafting leg.-type solutions to protracted legal probs 10)Aftermath – CW that Bk
better in mass tort cases than jud. crafted solutions 11)Breyer dissent – fund lim w/in meaning of 23(b)(1) – risk that toal
value will fall below claim value such that subsequent claims “sub. impaired.” Doesn’t care abt upper fund limit certainty,
just need probabilistic calc. Thinks ct puts formalism ahead of pragmatic problem-solving—too much emphasis on historical
meaning of lim. fund cases. Also says Ps getting good deal substantively—looks at substance of deal. Also, externally, no
legitimacy concern bc not nature of case that is novel, just a massive number of case 12)Maj/dissent demonstrate split bw
orig. conception of complex lit and more recent concern – breyer cares more abt orig. concern – protracted cases suck up ct
resources – wants to avoid delay, costs, inconsistency of adjud., etc. Maj reflects fewer conception – real concerns abt
internal and external governance, legitimacy of use of CA device, etc.
In re Simon II Litigation – Ps try to cert nationwide mand. CA solely w/respect to pun. dmgs against tobacco corps on lim.
fund theory bc pun. dmgs supposed to have some Const. upper limit – meant to punish, but can’t be excessive. Plan to calc.
comp dmgs in first part of trial, but Ds won’t have to pay them – just baseline for pun dmgs. CoA decerts 1)Stumbling block
– SC has held upper bound on pun dmgs in some cases, but has never explicitly held that in the agg., some upper lim. on pun.
dmgs 2)7th amendment concerns – how can you have settlement trial solely for determining pun dmgs w/out having binding
effects of prev. decision on comp. dmgs under 7th amend.? 3)in absence of further SC clarification, mand. CA that is lim. to
pun dmgs unlikely. Need to go back to Ortiz idea – everyone must be at the table to divide up the pie 4)If had allowed this,
could have cert a nationwide class in virtually any mass tort—case theory too speculative 5)Case replicates self-referential
justification for mand. class treatment that Ortiz rejected as a basis for the assertion of governing power
C. The Issue Class – 23(c)(4)
1. Overview
- 23(c)(4) arguably in tension w/23(b) predominance req for opt-out CA cert
- 3 basic concerns in caselaw over issues classes, and one sub rosa concern that drives much of the consternation:
1)tension b/w the use of issue-only classes and the 7th amendment’s reexamination clause 2)the rel b/w 23(c)and
other rule 23 provisions 3)the place of the mandatory class when cert. wrt issues only
ALI § 2.09 and Comments a & b – takes position that any agg. treatment of common issues must provide claimants with 2.08
protections, including opt-out and interlocutory appeal on common issues determinations
2. The Seventh Amendment
In re Rhone-Poulenc – Dist. ct certs nationwide issues class of HIV-positive hemophiliacs suing D manufacturers for
alleged neg. in handling of blood products. Cert. only on Q of negligence, not on whole claims. Posner concerned abt poss
issues w/7th Amend. Reexamination clause (prohibits reexam. in fed. ct of a)fact b)tried by a jury) & comparative negligence
– later juries might negate/reexamine Qs raised and dealt with by jury in first action 1)McK says dramatic idea, suggests
Posner hiding his other concerns. Could have comp. neg. case where jury told partic Qs of hist./tech. fact must be taken as
true, and poss jury could decide implausible, but always true in any case that follows from another case –odd formalism here.
Seems unlikely to occur 2)Also, products liab. case – comp. neg. never comes up in this context – how would Ds show Ps are
comp. neg.? “Make-weight” arg. – surface rationality, but nonsense. Still imp., bc cts reference this in issues class context
3)Hidden concern – too easy to have issues classes. Doctrinal concern abt reexamination clause and 23(c)(4) class, but real
issue that issues classes make class actions too easy—blackmail Ds bc too easy to aggregate 4)7th amend. not taken seriously
anywhere else procedurally—why such a prob. here? A front for Posner’s other concerns. If skeptical of extending # of CAs
in first place, doubly skeptical of use of issues classes. Hostility of issues class/anything making class treatment easier here
3. Predominance
In re Nassau County Strip Search Cases – County adopts blanket strip-search policy for detainees. Sued, judge deems
policy unconst. under 4th amend, but did not enjoin. Common issue here, Ps want dist ct to enjoy policy. Claim as a whole
cannot proceed as a CA bc of individ. prob of showing there was no cause to search indiv Ps. Potential for individ. Qs means
can’t cert on whole claim. Ds concede that policy unconst, but dist ct says no issues class on const. of policy bc vertifying
issues class must be for contested issues – once everyone agrees on, drops out of calculus, can’t consider it when trying to
figure out whether cert permissible 1)2d cir disagrees – touchstone is whether some area of case where there is suff
cohesiveness to call agg. a class. Doesn’t matter whether cohesiveness the result of Ps’ factual allegations or Ds’ concessions.
Fact that D concedes issues doesn’t mean it drops out of predom. analysis. Otherwise, will have to lit. issue of const. v
unconst. in every case – lead to inconsistent results, waste of time, etc 2)Dist ct also says 23(b)(3) says have to look to entire
claim to see whether predom. satisfied – if can’t show predom. of common issues wrt entire class, no CA treatment. 23(b)(3)
trumps 23(c)(4). 2d cir revs – if read this way, can never have opt-out class for issues unless could cert class on full claims—
would thus never need issues classes at all. Don’t want to read 23(c)(4) out of rules. When approp., take as much of case that
can be treated in common and look to other qs afterward in individ. lit 3)dist ct goes through 23(b)(3) factors – says CA not
sup. to piecemeal lit. 2d cir disagrees – most class members won’t want or be able to bring indiv lit (don’t know of violation
of rights, but for concession).W/out class cert/notification, no knowledge of rights violation. External governance concern –
CA an effective way of monitoring/punishing/correcting Unconst. govy conduct – a good thing, and w/out it, won’t have that
kind of pressure. A few Ps might still bring indiv claims, thus satisfy some external govy concerns, but maybe not suff. to
deter similar conduct+comp. litigants fairly 4)Ds concede unconst. policy bc already lost on that in prior action and strategic
move to check CA—if no cert, odd that Ds concession that wrong could help it avoid CA 5)2d cir also saving Ds – CA better
than 10K indiv suits – take litigation position to defeat class that may hurt them in the long run 6)Order of operations – first
apply 23(c), then 23(b)(3) to see if predom/sup. satisfied, not 23(b)(3) first.
4. Mandatory Classes
Allen- Title VII claim of hostile work enviro. on account of race. Ps seek both eq. relief and dmgs. Dist ct won’t cert CA,
though all 23(a) reqs met. Ps file 21(f) interloc. app. Easterbrooks revs on account of ct error+appeal would promote
development of law. Interloc. appeal imp here bc otherwise Q presented would escape further review. Econs. of lit. imp. here
– Ps/counsel won’t continue w/out cert 1)7th cir says have hybrid class w/opt-out under 23(b)(3) for dmg portion. Trial 1
(mandatory class) could est. findings abt hostile work enviro, gen class issues, and ruling on injunctive relief, etc. Could then
have indiv trials on dmgs—substantial enough for indiv. Ps that better for them to proceed indiv. (and must allow opt-out
right if sub. financial dmgs at issue).Dist ct had rejected this for 7th amend. issues—2nd jury might not believe case 1 findings
– risk violating reexamination clause, and said P injuries not common enough. Easterbrooks says no problem. Either a)allow
opt-out or b)deny preclusive effect, so class members in follow-on dmg action don’t get benefit or burden of preclusion
2)Easterbrook doesn’t treat 7th amendment reexamination concerns seriously – diff from Rome-Polanque decision—where
judge unsympathetic to class treatment in that case. Here, judge more sympathetic to this case, drives this decision—
important to consider. Just cert class for injunctive purposes while handling dmg issues separately 3)Alt. to class cert is many
indiv. trials – inefficient. CA is sup 4)Easterbrook says class treatment – forces P counsel to be fiduciaries for entire class –
from external govy perspective – max. entire group’s recovery, not just for indivs 5)Issue classes increase settlement pressure
on Ds 6)Approach here – even if can’t cert wrt entire case, might make sense to go as far as you can by cert. partic. common
issues for which indivisible claim(s). Also, w/out CA, no way to craft injunction—need all employees. Can’t grant eq relief
to one w/out affecting all their rights 6)Sub rosa theme – class treatment under circs good thing – benefits for Ps, society in
general, cts, lawyers owe fid duties to entire class, not just indiv Ps. CA also provides money incentive for vigorous pursuit
of claims – rare admission in jud opinion
D. Class Certification and the Merits
In re IPO Securities Litigation – Allegations of sec. fraud in ipos by issuers, UWs, officers, from 90s dot-com bubble –
conspiracy bw analysts at UWs, corps, etc corrupted analysis, inflated ipo prices. 310 sep. actions, each one based on number
of issuers, consolidated. All based on FOTM theory. Dist. ct said rule 23 reqs met based only on “some showing,” not
ordinary “preponderance of ev.” req, bc of fear of violating Eisen rule against merits-peeking when making cert. decisions.
Prob, Eisen ct looked at factors unrelated to core rule 23 inquiry – so case didn’t really say can’t look at merits when some
consid. of merits req., as is often the case for class cert. Tension w/Falcon – said sometimes cts do need to probe pleadings to
assess whether rule 23(a) reqs satisfied 1)Recent changes to rule 23 – suggest greater room for merits-peeking – a)can go
deeper into case before making decision on cert – now “at an early practicable time” and b)removes “may be conditional”
language from cert – makes cert decision more lasting Mck says ct overplays this – changes to rules meant to conform to best
practices that had already developed 2)Takeaway here – don’t take Eisen out of context – permissible to prob a bit in
considering class cert – but how far? If intermingling of qs of fact and law, dist ct must nonetheless do its best to resolve
disputes on those points. Reinterps Eisen to say that can look at merits if merits overlap w/rule 23 criteria. Ds may win this
case, defeat class cert, but in long run, when cert granted, implicit that merits of case are decent – may arguably increase
pressure to settle bc greater suggestion of determination on the merits/higher barriers to cert. Signal abt judge’s perception of
where case going 3)McK – suggested that judges can use discretion on this, but judges not very good with case
management/amorphous rules – see ex. of discovery – practical result is that have expansive discovery, bc judges hate
managing it 4)Judge suggests dist ct has leeway – ap. standard here will be abuse of discretion/clearly erroneous standard for
fact finding, de novo for issues of law. Sounds easy, but caselaw for abuse of discretion all over the place. In practice, prob of
one of two extremes – lax review or very detailed. Ct here punts, gives tiered system of review that is impractical. Tripartite
review standard – factual findings-clear error, legal issues-de novo, application of standard to facts-abuse of discretion 5)Ct
refuses to remand after this – as articulated, new standard means no reas. dist ct judge could find reqs met—a)no reliance can
be est. here, no fraud on the mkt for ipos, nec element of sec CA. W/out FOTM, prove indiv rel., imposs, indiv qs overwhelm
CA. Rebuke of Scheindlin creativity 6)A lot merits/class cert inquiry turns on expert testimony abt the respective strength of
Ps’ case and Ds’ defenses – overlap b/w merits and class cert factors 7)McK – shows how SC rulings can take on life of their
own.
IV. Class Counsel – 23(g)
A. Selecting Class Counsel
- Class counsel Qs of the utmost importance in CAs as practical matter. Class reps figureheads, counsels run the
show, and if wrong counsel selected or poor incentive structure chosen, counsel won’t take actions in line w/class’
best interests, and diff to check that. Named reps. can’t fire counsel once named – have rel. w/entire class. Also,
debates over proper incentive structure – P layers typically stake operation upfront. No payment = lose money.
- 23(g) – ct appoints lawyers for classes/subclasses, supposed to be guided by variety of factors, including
experience, counsel background, fin. resources (imp. if lit. staked by counsel), and efforts in working up case (priv.
AG conception of CAs—comp. for sniffing up wrongdoing).
- PSLRA – Cong alters manner of selection of class counsel in securities class actions – corps w/greatest fin interests
in D will be class counsel, in theory. In theory, those w/biggest stake select counsel—promise of real
monitoring/control over counsel by class member, but most inst. investors don’t want to be lead counsel bc a)takes
time/effort/etc to monitor counsel – monitoring costs not insubstantial b)fear of litigation – dragged into discovery,
etc, Shutts fear, not just another faceless member of class c)fear proprietary info will leak out, have to disclose info
on investments etc d)most inst. investors have close biz rels w/corps sued – easier to stand in shadows and hope to
collect money—if seen as leading class, not good for reputation and will hurt long-term interest as investor
- 23(g) sets out 4 factors ct may consider when appointing counsel: a)work up in bringing the claim to ct b)counsel
experience in complex lit (not as practically imp) c)counsel’s knowledge of the law (not as practically imp)
d)counsel’s resources – reality of most lit – P counsel funds lit. Also includes vague “any other relevant factor” – can
include lawyer comp.
In re Auction Houses Antitrust Litigation – Collusion b/w sotheby’s/Christies on prices. Civil lit follows crim. pros. Dist
ct trying to decide on counsel. Initially goes with closed-door bidding process w/2 numbers, x, lower number, below which
money goes entirely to class. Above this, y, part goes to counsel, rest to class. Ct then revises this, asks for 1 variable, x,
100% of recovery up to that sum goes to class. Above that, 25% goes to counsel. Crit. of first structure – increment between
x and y creates a problem. Concern that will lead to disalignment between class counsel and class—might have circ where
class counsel feels need to push to trial for poss of upside, even if downside potential much greater, bc counsel in stage where
needs to reap all the benefit from the upside 1)2 other common methods – a)lodestar – ct decides on reas. fees, multiply by
hours worked. Contingent on Ps winning. Other subjective factors – skill of attys, risk of lit, etc – multifactor balancing test,
hard for cts to apply. Benefit – reward counsel for work. More time/skill, greater comp. Multiplier on top to comp. for risky
case or outstanding achievement. Prob – incentive for attys to excessively bill/rewards inefficiency, and diff to determine
whether counsel deserves special fee diff b)contingency – prob of opportunity costs – might settle quickly bc not rewarded
for time put in – minimize money expended around case. Also ethical consids – counsel may get massive recovery for doing
no work---this structure designed to push lawyers beyond where they might otherwise want to settle in pure contingency
case. Bid not made public bc Ds could take advantage – work product 2)This structure isn’t used in many other CAs bc might
not draw best counsel 3)Ct never says money bid only consid – consider trad 23(g) factor wrt competency, weighted by bid
4)Unusual case, no working up of case – govy crim case did all the work in terms of ferreting out misconduct. Don’t have to
worry abt disincentivizing independent investigation. This structure applicable to other SEC/DOJ cases, which comprise
many of the CAs that are filed 5)Some ev. this structure pulls in quality firms – wouldn’t mess around with first filing
nonsense that tends to take place in other CA contexts – may change political economy of CAs by pulling in a broader base
of firms 6)Judge relies on “any other relevant factor” vague language in 23(g) to do this
B. Fee Awards
- Sometimes ct chooses counsel based on comp. counsel agrees to. 2 main methods of comping: a)common fund
approach, as in Boeing – where D argued atty fees should be based on portion of J actually claimed by class
members. SC says principle underlying common fund approach comes out of equity—quantum meruit/unjust
enrichment. Someone who benefits from atty efforts should pay for them---does this answer objections for nonclaiming class members? Suggestion that if fees based solely on prop. of funds recovered, those who do recover will
share greater burden of lit. than equitable. Also, Mck says unconvincing, but argued that everyone benefits bc even
members of class that didn’t recover have received the right to recover, whether or not exercised it. Sense that things
more complicated for comp based on % for both ct and attys b)lodestar method – ala Cendant – counsel paid
separately from class. Disgruntled lawyer repping Ps – use lodestar method to check contingency % method. Concern
abt policing counsel’s rel w/class—sense that counsel didn’t deserve exorbitant comp.
- Nagareda favors % of fund recovery, w/crosscheck using lodestar method bc lodestar alone diff to apply, gives
incentive to pad hours, extend litigation, etc. McK on other hand skeptical of benefits of % of fund or horrors of
lodestar method. Real answer perhaps
Boeing v. Van Gemert – Corp. issues corp. bonds, can redeem for slightly more than face value in cash or for 2 shares, the
value of which far exceeds the value of the former redemption method. Some Ps don’t convert by deadline, claim rights
violated, sue, win. Corp claims atty fees should only be based on amt of pot that is actually claimed by indiv Ps. SC rejects
this 1)quantum meruit – unjust enrichment. Lawyers create common fund, Ps shouldn’t get benefit of fund w/out paying
parties that created it. What benefit accrues to indivs that don’t claim the award? Does this make sense? 2)Hint that benefit
not nec. cash in pocket, but rights of bondholders have been vindicated – common fund deters wrondoing/vindicates rights
above and beyond comping indiv bond holders – unjust to allow them to get intangible benefit w/out paying party most resp.
for creating the benefit. Need to provide suff motivation for lawyers to piece these actions together. Is society really better
off? 3)Prob – if only fraction of pool taken, claimants get hammered w/fees – better to spread them out. Q – why shouldn’t
lawyers bear costs if not redeemed? 4)McK says quantum meruit a bogus justification, sense that want class as whole to bear
risk that not everyone will show up to collect – lawyers creating valuable opportunity 5)Other ways of comping class counsel
– a)person that wants to stake lit should literally post bond in that amt. Anything more, keep all or some prop. of surplus
b)class counsel literally buys claim from class and proceeds in lit w/placeholder name—perfect alignment of class and
counsel interests, but ethics rules look down on buying/selling claims by lawyers – fear lawyers will litigate for purpose of
litigating
In re Cendant Corp. PRIDES Litigation – P counsel settles lit with D. P counsel paid, and anything left over after class
members comped is canceled, so lawyers’ comp doesn’t turn on the comp. of indiv. class members. Trust/member of class
objects to this on grounds of inadequate notice of settlement. Why do this? Ppl hate lawyers, maybe interest in setting
precedent to cut back on firm comp.—lower fees over time. Trust is repeat player. No economic benefits to Ps from reducing
lawyers’ fees 1)CoA treats this as art. 3 standing – rel b/w Ps and counsel imp. such that reqs special attention. Ct has some
supervisory or other interest in policing lawyers. Class member has interest in policing atty conduct even if no direct
economic effect 2)dist ct approves comp – contingency fee method, but checked by lodestar method. CoA does cop. analysis
of previous awards in these cases, lodestar multiplier 7x here, whereas 2x more typical. Also, no complex legal issues,
complex discovery, acrimonious lit, etc. Should we care abt windfalls? 3)From D perspective, this is all a black box – have
no int. in how much lawyers get – but maybe ct/Ps have interest in policing atty work/conduct to prevent self-dealing
ALI § 3.13 and Comments and Illustrations
C. Strategic Considerations
Staton v. Boeing Co. – Employment discrim. case v. Boeing, settled. Corp gets broad release from claims and subject to
injunctive relief. Group of objecting Ps try to overturn settlement. Issue – atty fees seem high. Common fund purported to be
big – but value of injunctive relief seems lower than claimed, and dist ct didn’t check fee w/lodestar method. CoA not
supposed to look at merits of settlement, but driving decision here. Suggestion that lawyers didn’t provide much value – req
boeing to make some changes, but it had already unilaterally done so. “Experts” like Jessie Jackson sign off on this, but ct
doesn’t care. Counsel gets fee+money to monitor/administer relief, but ct thinks this will quickly run out – little benefit to
class. Signal comp. is out of whack 1)Case not strong, counsel lucky to wring this much out of Ds, but ct formalistic –
suggestion that D and P attys in cahoots – don’t reveal to P class how much attys getting. Inadeq. notice. CoA says when
specter of counsel self-interest, cts need to be partic. vigilant—sign that ball-hiding going on 2)Easterbrook note – ordinarily,
fees neg. w/client upfront, before lawyer starts work. Prob here is attempt to reimagine what amt reasonable at outset of lit--need scrutiny of ct to keep attys in check, but needs to be in the 1st instance, not ex post 3)No standing concern here—
hypothetically, atty fees detracting from amt class members getting 4)Nothing wrong with common fund, but procedures say
first decide on amt of fund, and then have ct decide what constitutes a reas. atty fee, even if no D opposition 5)Parties tried to
package this up in one deal – didn’t do fee-shifting available under statute, but also tried to avoid having ct supervise
common fund. Can do award of fees under fee-shifting statute, but if going with common fund, have to follow those
procedures, under which the ct sets the fee---diminishes poss that D & P counsel will collude in way that will deprive class of
money, but D counsel indifferent 6)Dissent – practically speaking, good deal for Ps. Fees not reducing amt of recovery here.
Comforted by judge/process/merits of case 7)Maj. skepticism reflects way most cts see these issues—even if no ev.,
decisions abt fees based on poss. of chicanery/collusion, even if unproven
V. Defendant Classes
A. Opt-Out Classes
Thillens – P claims conspiracy to restrain ability to trade on state currency exchange, sues Ds in class. 2 poss probs here w/D
classes: a)P class members don’t have to do anything. D class members diff—stand to lose something. All downside. Only
potential upside for Ps in CA. Need to have common link w/P and Ds, but can waive if have “juridical link.” Ct says if
linkage bw Ds more than juridicial link, worry less abt each indiv D bearing some burden. Also, case involves alleged
conspiracy—ct getting at sense that this is a highly cohesive group. Suggestion that Ds opted into wrongdoing by engaging in
behavior—not as worried abt burden on members. This structure still rare bc not only conspiracy, all Ds members of spec.
association – strong suggestion group org. by ties that go beyond P’s allegations b)major issue is adequacy of rep –D rep
doesn’t want to do this –says poss of coll. estopp. bc of guilty plea in previous fraud case—may be precluded from putting up
able defense for indiv Ds. Dist ct says irrel for purposes of this lit. 1)predominance – indiv defenses, but common issues
much more time-consuming/complicated – much cheaper to agg. actions. Also, if no cert here, 100s of actions in NDIL—
overwhelm docket 2)Before indiv liab set – Ds must have mini-trials where P est. that whatever form consp. took, partic D
was involved. A lot of ev. proving this either way will be developed in main lit. Doesn’t mean this will overwhelm issues
common to class 3)expensive for assoc to lit this – class members as members of assoc. would have to pay for this
anyways—indirectly paying/benefiting 4)finally, if ds don’t like this, will opt-out. If stay in, perhaps approp for dist ct to tax
class to pay for ongoing lit expenses 5)Takeaway – this partic case, assoc already an org that includes so many of indiv Ds
that concern abt fees dissipates a bit 6)TEST for whether D class approp: 2 parts – a)a)showing that P has colorable claim
against each D in class OR a showing that the Ds related by a conspiracy or juridical link b)showing of predominance(23b3
class – always need this). First part of test is puzzling – reference to rel. among Ds that must be there suggests that juridical
link means some type of connection outside of claims – Ds part of some organization of some kind, etc. Later, ct suggests
conspiracy alone good enough to satisfy that. Real prob with D classes generally – P one forcing class treatment on Ds,
nominating class rep. One thing when P puts self forward as class rep – diff when adversaries are picking reps for their
adversary – lots of gamesmanship – why does P pick the assoc. as rep? Assoc. had pleaded guilty to certain wrongdoing
played a role – supports allegations made in complaint by P, but D says no conflict bw assoc and D class suff to deny cert.
McK says troubling – having assoc. litigating case for Ds means atmospherics of case bad for Ds.
B. Mandatory Classes
Henson v. East Lincoln Township – Attempt to cert mand. D class under 23(b)(2). Prior case finds IL welfare depts. needed
to provide greater transparency in welfare reqs, but not statewide ruling. Both P class and D class – Ps try to have named Ds
rep every other welfare dept in state that does not receive state aid. 23(b)(2) lang seems to auth. cert, but Posner says lang.
only really contemplates P class, so no mand. D classes. Even if can read rules to allow this, not clear would bridge some
remedial gap. 23(b)(2) doesn’t req notice – might be bad for D classes – but notice provided here. Also, local govys not partic
sophis – why isn’t this challenged under 23(a) adequacy of rep bc depts. too small/no resources. Posner transfers this to
23(b)(2) bc wants to limit this – suit could theoretically involve every welfare county in US. No limiting principle (except
PJ).When there is not some rel w/Ds that exists outside of class, no logical stopping point in 23(b)(2). PJ would prevent some
of this, but Posner says structure unwieldy 1)Is real prob size of class or double CA? Prob – P1 may not have claim against
anyone but D8 – maybe real prob is that classes on both sides. Too broad a reach by dist ct as governing class or internal
govy prob – every P doesn’t nec have an issue w/every D class member. More prosaic, but perhaps more persuasive reason
for not allowing this that each P should have a claim against each D 2)If can’t do this, can have consolidated indiv actions for
purposes of pretrial discovery—some efficiencies. Even if not all counties sued, will comply bc will have to pay lawyer fees
if lose cases under civ. rights fee-shifting statutes. In terrorem effect of a few suits will bring Ds into compliance w/Const.
But if that’s the case, why is P suing? 3)If there were an opt-out class under 23(b)(3) – no enforcement – Ds would opt out.
Stay in, have to pay P and D fees, and poss of judgment/having to do work – D class will have to produce documents, sit
through depos etc – can’t just sit there
VI. Forum Selection and Rival Proceedings
A. The Class Action Fairness Act
1. Background
- Trad, right wingers want to keep things in state cts, left wing favors fed. Flips w/class action – concern abt mass
torts in partic favorable Js. Ps name non-diverse Ds to stymie complete diversity req for fed ct div. J, only to drop D
after removal statute period has expired. Fear of corruption . CAFA doesn’t apply for corp. law – view that DE doing
good job handling corp/securities matters. CAFA really abt partic kinds of large-scale CAs, typically involving
products, consumer fraud, ins. bad faith, etc.
- CAFA: a)alters rule for complete diversity, so that only minimal diversity required in any class action in which the
amt in controversy exceeds 5 mill. So long as any member of class from diff state as any D, satisfy diversity req.
b)changes aggregation rule for amount of controversy – before this, each P had to meet 75K amt in controversy req
individually c)changes removal statute so that a case can be taken to fed ct, from state ct, by a D. Any D can remove,
and hometown D can remove. Carveouts if plurality of Ps from same ct, same for Ds. If greater than 2/3 of Ps from
same state, dist ct shall decline to exercise J – other reqs as well.
- Probs w/CADA – doesn’t define “primary defendant” for 1/3, 2/3 rule. Also unclear provs. And no ap. review of
sending cases back to state ct.
- also presents cts who are applying the statute with the temptation of creating federal common law. Either to guide
choice of law or to guide the decision on the merits, esp in nationwide class actions. Nothing abt choice of law in
CAFA. Some scholarship that says should be federal common law duties for class actions. Other scholars say when
have nationwide class action in fed ct—should alter klaxon rule – when fed ct sitting in div., apply law of J in which
ct sits
- zahn rule – each indiv P must meet amt in controversy req – cafa overturns that and by Exxon (allows other Ps to tie
their claims to a joint P who does meet the AIC req)
2. Mechanics & Consequences
B. The Multidistrict Litigation Act
1. The MDL Panel
- response to concern abt group of complicated antitrust actions brought by the federal government against the entire
electrical equip industry. MDL sets up a panel of judges selected by the chief justice. They are permitted to
coordinate or consolidate proceedings in a partic district or districts, in the interest of justice.
- MDL panel given power to shape litigation--brings together actions filed in multiple venues to a single dist ct for
pretrial proceedings
- make motion for panel to xfer, they decide what to do. Panel has lots of discretion, leads to bickering over where to
xfer case
2. Selecting the Transferee Court
In re Silicon Gel Breast Implants Prods. – MDL has to decide whether and where to send actions under statute. Args that
judges in CA familiar with lit, and sub. prop. of members of P classes reside in CA. 2 groups here trying to send lit to diff
dists – fight over which faction leads class and whether lit should proceed on indiv or classwide basis 1)panel says shouldn’t
matter, all judges listed qualified. Judge ultimately chosen (not one requested by either party) bc panel trusts him – has
experience w/complex lit 2)McK says odd approach – give preference to party that wants to defeat. If party is indiff to where
lit lands, but strong neg. pref for a partic judge/J, this opinion shows how to get your way – squeal/be unprofessional
3)1407(e) – MDL statute explicitly says no real ap. rev. of xfer decisions –can only do this through extraordinary
writ/mandamus – hard 4)When lit xferred from one dist ct to another, orig ct’s law applies – van dousen rule – sanctioned
aggressive forum-shpping
3. The Role of the Transferee Court:
Choice of Law and Adjudicatory Authority
Lexecon, Inc. v.Milberg Weiss - Fight b/w law and econ. corp based out of UChi and big P-side firm. Lexecon involved in
scandal, Milberg reps Ps who sue them. Ds pay them, then sue firm for alleged defamation, etc. Lexecon sues in hometown
J—forum-shopping. Milberg runs to MDL for xfer to AZ under 28 USC 1407(a)– where lit for other related lit going on—
most docs there. McK says thin just. for xfer, but case demonstrates low threshold for MDL panel xfer. 1407a reqs panel to
remand action to orig district at or before conclusion of pretrial proceedings. AZ dismissed all but one count against Milberg.
Lexecon moved for AZ ct to remand to home dist. Milberg requested AZ ct use 1404(a) gen venue xfer provision – in interest
of justice, dist ct can xfer to another J where case might have been brought. AZ did this, CoA affirms 1)SC revs – ct
conducting pretrial proceedings pursuant to section 1407(a) has no auth to invoke 1404(a) to assign xferred case to itself for
trial. “Shall” means no jud discretion on this pt 2)Milberg had arg that dist ct’s self-xfer under 1404 terminated case w/in
meaning of 1407, so no remand nec—clever, but shot down 3)Home dist trial matters – lexicon won next round, sides settle
for huge amt – in this partic case, venue makes huge diff in outcome 4)Why would xferee ct want this? Judges see selves as
strong lit. managers, view trial as error – having power to retain case for trial part of toolbox – makes for more credible
threat, forces settlement. Do we care? Does this disfavor one party? Delaventura says yes.
4. Settlement
DeLaventura - Screed by judge against tentacular reach of MDL panel and distorting effects of MDL lit. Leads to
“vanishing trial” 1)requests for xfer under 1407 always granted bc statute sets low bar. McK says crit of both statute and
panel itself, which has not imposed greater scrutiny on xfers 2)Once xfer occurs, cases languish – much slower than if in org
ct – leads to delay. Upside – alleviates concern abt numerous sim lit actions+inconsistent Js. Prob – no adjuds, all settlements.
Fed judges/Ds benefit the most, as cases never go back to orig venue for trial – easy for Ds to defeat P choice of forum, and
MDL panel has culture of forcing settlement. Why do xfer judges want to hang onto cases after pretrial stuff done?
motivation hard to discern 3)Framework promotes idea of trial as error – push for settlement whenever poss by judiciary by
remanding it, doing other things, etc – strong pressure by judges to terminate it early 4)McK – judge’s opinion takes view of
litigants/Ps disadvantaged by delay – from jud system’s persp – simply conc. cases in one forum – no delay 5)McK – delay
disfavors Ps – creds don’t like delay, debtors do – P is creditor in civil lit – delay favors Ds/debtors 6)Third delay pt –
disfavors Ps, partic in kinds of cases in MDL system, bc Ps borrowing money to pros. cases –Ds win war of attrition bc of
greater war chest – leading to lower settlements for Ps. Delay also benefits D lawyers 7)Many crits of MDL system, but
unlikely to change – jud invested in system bc clears dockets/directs jud resources where needed
C. Inter-System Coordination
1. The Full Faith and Credit Act
Matsushita Elec. Indus. Co. v. Epstein – Corp makes offer for another corp, successful, leads to lit. CA filed in DE, only
raises state law issues. While pending, fed action filed in CA. Fed statute gives exclusive J over fed claims. State ct lit
settled—Ds get release covering both state and fed claims, including those pending in CA. Opt-out prov. Ds take DE
judgment to CA, say case gone—FFC Act applies for fed cts wrt state ct judgments (FFC Clause in Const art 4 reqs state cts
to respect Js of other states—give FF&C). CoA revs. One exception to FFC: rendering ct (one that issued judgment) must
have PJ and SMJ, or no FF&C. SC revs/remands 1)State ct can’t adjud. fed ct claim, but has power to destroy it. Opp rule
would make hard for D to achieve global peace—this facilitates this 2)No fed sovereign issue – if Cong doesn’t like it, can
create exception to FFCA 3)Ginsburg dissent – hint by CA Ps that no Const. suff adequacy of rep – Shutts prob, and DE
judge didn’t make a determination on this. Has Qs abt typicality of class reps, gen adequacy, etc. Ct says judgment fair, and
DP reqs satisfied, but doesn’t hold that—a little slippery. Ginsburg worried abt collusion b/w D and P lawyers to detriment of
class. 4)Case another variation on fear that P lawyers in first action will sell out class for fees – sell preclusion, screw whole
class of Ps 5)DE likes this bc helps further its monopoly on corp governance – diff from usual just for DE corp law
dominance – this diff, acting beyond area of competence to protect own reg. interests.
2. Other Sources of Law
In re General Motors Corp. Pick-up Truck – MDL panel case on placement of fuel tanks in GM trucks. After class decert
by apt ct, Ps run to LA, file same case, get cert for settlement. End run around MDL panel. Slightly better/diff settlement
terms, cond cert for nationwide settlement. Objectors seek injunction to quash LA proceedings and file appeal in LA state ct
1)3d cir recognizes 3 potential sources bearing on propriety of dist ct actions: a)FFCA – final J under LA law, can’t be
reviewed. If LA ct had ignored fed ct order and went to J, no FF&C. Once state ct enters J, incredible power – so much
practice here rush practice to get fed ct to enter injunction or if won’t, to get to CoA as quickly as poss, once J, out of luck
b)Rooker-Feldman doc – fed cts can’t review final adjuds. of state’s highest ct. Dist cts have lim SMJ – only orig. J, not ap. J,
except for some admin proceedings. No J, no R-F prob. Objection to lower few cts trying to review/revise state ct judgment
or final order. Preserve place of SC as sole app. body reviewing work of state cts c)anti-injunction act, allows fed cts to issue
injunction against state cts if nec in aid of J or in protection of Js. 3 exceptions - fed cts cannot injunct state ct proceedings
unless a)cong says fine b)nec in aid of fed ct’s J c)to protect or effectuate fed ct judgments. This includes enjoining parties
from pros. actions in state ct. Usual reading of this that strong and broad, and exceptions narrowly invoked – this decision a
good assessment of that mood 2)LA jud. had opt-out provs – does this matter? why not just opt out of fed case? competition
among P attys – case in MDL, all same forum, jockeying by attys, objector attys boxed out. Opt-out not taken to screw other
lawyers 3)Nice encapsulation of way to think abt anti-injunction act – most heat comes from fuzziness of “nec in aid of J”
and “effectuate judgment” lang. No real prob here bc fed ct had decert – could still regroup, but no official fed action state ct
impinging on. In reality, deflates fed ct action, but judge fine with that—no showing of direct harassment or review of fed
proceedings-Anti-injunction Act note - fed ct can stop competing proceeding if 1)would interfere with ongoing fed ct
proceeding, or 2)state ct proceeding would run afoul of fed ct judgment, but cannot stop state ct proceedings that don’t
threaten the fed cts management or disposition of a case, or state ct proceedings that have already proceeded to judgment
- Interp/app. of AIA depends on interplay bw state and fed ct actions, but also fed ct mood abt intent and merit of
state ct proceedings
In re Corrugated Container- Antitrust allegation for treble dmgs—allege conspiracy. Case in front of MDL panel. Can’t
bring fed antitrust claims in state ct, so bring state claims. Same attys as in fed case. Dist ct enjoins Ps from pursuing state ct
action 1)Not like GM bc “in aid of ct’s J” exception. Will render fed ct’s work moot. Injunction against releasing state claims
in another ct – imp. of global peace—settlement unlikely in fed case if barred from settling other claims—state ct carving out
portions of lit 2)Also protecting J – settlements involving some of Ds in fed ct, but not finalized. 5th cir may be saying “nec in
aid of J” covers this area as well as “protect Js”---res jud here bc fed Js that approve some of the settlements. Usually cts
invoke All Writs Act as well – fed cts can issue writs in aid of J, even if Cong. doesn’t say they have this power, if nec. to
keep houses in order. Anti-injunction act the cap on the All Writs Act 3)Ct says no affront to state cts bc harassing lawsuit.
Ev. of this is state ct tries to prevent settlement of fed ct action of particular terms. State cts can’t enjoin fed cts from taking
steps – fed cts can enjoin state ct proceedings, but state ct can’t do it to fed ct except in in rem proceedings – where only one
ct can have J over a debtor res
Eagle Picher – Broad application of Anti-injunction act. Asbestos orp trying to avoid Bk – ct certs 23(b)(1)9b) – lim fund
class of all present and future claimants. Special master looks into fin. assets to determine whether in danger of being
depleted. Bc lim fund, argued that other actions will deplete it – leads to inconsistent Js. Could interfere w/settlement process
here as well 1)Ct says has res here – in rem action – stronger arg where lim fund – and needs to protect it 2)Also argues like
interpleader actions – analogous – couple this w/anti-injunction act+all writs act = suff. to do this 3)Tone here diff from other
opinions – not reluctant to issue injunctions against all other cts – construe anti-injunction act liberally. More adventurous
approach to ostensibly black/white statute 4)Calls interpleader, but isn’t this bk? Shouldn’t this have gone to bk? Special
provs for asbestos cases—insolvent if liabs exceed assets. Ortiz seems to suggest this is illegitimate 5)What if state ct tried to
enjoin fed ct? One-way rule, distrust of state cts 6)Weinstein thinks better if complex lit handled in single forum where global
peace can be assured. Fear of gamesmanship – parties run to another forum to get leverage in fed action—this power prevents
that
Carlough - 23(b)(3) asbestos class (went on to become Anchem). Ps run to WV after case filed in fed ct, when settlement
imminent. Ct says injunction nec bc of anti-injunction act and all writs act in aid of J. Same Ds both cases, but WV case lim
to future claimants/WV residents. Not strictly parallel relief requested, but intended to challenge propriety of fed action . Try
to get state ct to auth. mass opting out of WV Ps from fed action 1)Case a nice balance bw GM and Eagle Picher – suggests
red flags that push fed cts to a willingness/desire to grant injunctions—not simply when competing state ct lit, but when state
cts being used to review fed ct judgments 2)Ct says fact that Ps in fed action have opt out right enough to protect them.
Suggestion that failure of WV lead Ps to opt out of fed action an attempt to get review of fed ct decision-making in fed action
in WV state ct –ev of bad faith 3)Ct concerned abt poss confusion that might be created when Ps in existing fed action
receive notice from competing WV state ct action. Contradictory notice issue
VII. Class Settlements
A. Direct Review of Class Settlements
1. Standard of Review
Reynolds- Dist ct approves settlement of consumer fin. CA relating to H&R Block+Beneficial’s collusive tax refund scheme,
awards atty fees. Objectors appeal. Posner revs. Not completely passive dist ct – mods some term, pushes for more comp.
Terms – unclaimed funds remit to Ds, 1 mill claims, potentially whole claim amt exhausted 1)Posner says fuzzy how they
arrived at these numbers. No substantive oversight, circs pt to collusion bw P lawyers and D reps – P lawyers didn’t have
clients at time, looks like selling out class/preclusion for lower value/reverse auction 2)Hist., claims look like losers, but
more recent ones better. TX action survives SJ, goes to trial. Posner says imp. for setting value – would affect EV of
settlement value. Must do some inquiry. Some variance, but can use to gen. high, middle, low range of awards, and poss of
getting nothing. Economics of settlement imp, and must take partic steps before CoA will be comfortable approving
settlement on appeal. Dist ct demonstrates lack of economic savvy & this coupled w/rev. auction fear drive decision. Q – do
you always need ct to do estimation procedure under 23(e)? 3)Other issue – good deal for corps – figure comes out first, then
doesn’t change, even when addtl D added. Red flag. Suggests number not moored to assessment of strengths or merits of
case. Not many ppl claiming refund—real prob here is dist ct injunction preventing TX lawyers from even updating class abt
status of lit – didn’t know those claims might be valuable, couldn’t opt out 4)Also, ct orders hours spent on case w/held from
class—can’t see how high fees are. Posner doesn’t like this – doesn’t seem like atty and client interests aligned 5)Cts hold
fairness hearings w/findings, but at some pt, have to go on faith that this is best way to police conduct – other ways of doing
this, notes suggest. a)devil’s advocate – challenge settlement terms, but how to comp them? pub funds unlikely. pay out of
settlement amt? incentive to bump up class awards, but conflicts of interest b)bond proposal – dist ct assesses fairness, but
isn’t pt that we question whether dist ct has the proper tools to assess this? c)public labeling – settlement given grade by
agency – criticism – rely on outside group to do this for every single case. Prob of industry capture.
ALI § 3.01 and Comment a
ALI § 3.02 and Comments a & b
2. Objecting Classmembers
Devlin - ERISA case – COL adjustment given to beneficiaries too generous. New trustees of plan decide to freeze it, then
elim. Ps try to cert mand. class of all plan members. Various subclasses. Named P here proposed as one subclass rep, but
declines, pursues sep. action in NY dist ct. Dismissed bc not done formally, then denied as untimely. He objects to ultimate
dist ct approval of CA settlement here on appeal 1)Rule – non-present members who have objected in a timely manner can
appeal, even if not named a party to proceedings, even if didn’t intervene to be named as a party to proceedings 2)Why isn’t
this unanimous? SOC – class members bound by J approving settlement – therefore should be able to challenge settlement
3)Scalia unconvinced – thinks should have to intervene first as screening device to get rid of random objectors/nutcases after
settlement approved – would prevent random non-named class members from appealing. Likes clarity of rule/dist.b/w parties
and non-parties – wants to maintain that dist. Party means certain rights/obligs, of which power to appeal is one of them
4)Who cares? Why not set clear rule either way? Might lead to lawyers buying off objectors – case raises blackmail value of
objectors—and anyone who will really seek further review beyond CoA are wackos, sophisticated parties looking for
payoff—idiosyncratic in some way. Also worry abt objectors that act as stalking horses for competing P lawyers seeking to
torpedo a deal – harder to get rid of them with an objection-only rule without an intervention req. 5)Get around some
concerns by structuring settlements such that P lawyers get money immediately – reduce objector leverage over lawyers –
can claw it back later, but obviates threat of gumming up works to prevent P lawyers from accessing much needed funds
6)For some purposes, being party matters, for others, doesn’t. Diff implications in diff settings. Hansberry implication –
parties bound, non-parties not bound unless exception like CA, but doesn’t nec mean non-party doesn’t have powers in lit.
Power to appeal not something so unique can’t be shared by other parties to lit. Pragmatic view that dist. Scalia cares so
much abt doesn’t matter as much in CA lit 7)Might be diff if opt-out class – have other way of protecting themselves short of
full-blow intervention. However, given pragmatic tone of maj., ct would prob. say objection suff. for an opt-out class
8)Animating maj – concern abt who is watching the watchers. Energize objectors, potentially pt out more
probs/conflicts/concerns, and that’s a good thing if we are worried abt collusion in CAs – what really drives this decision.
Rather pragmatically draw line in way that allows class members to monitor reps—intervention easy under fed rules, but
doing it in timely manner means having to do it before misconduct, self-dealing, lack of rigor in crafting settlement apparent
to class. If we care abt CAs being abt giving voice/enforcing loyalty, maj makes sense.
B. Collateral Attacks on Class Settlements
Epstein v. MCA, Inc. – Followup on Matsushita, on remand to 9th cir – says DE ruling not binding bc of lack of
DP/inadequacy of rep. Then rehearing, one judge flips, get this opinion rejecting collateral challenge to settlement. Panel says
procedural DP satisfied here. Q for SC is FFC. On remand, petitioner gets benefit of much broader q than orig. presented –
McK says odd to allow petitioner to benefit from dodgy q on remand it wants to broaden – but what’s going on here is an
attempt to strongly disfavor coll. attacks on class settlements. Finality very imp. 1)Mck says odd reading of Matsushita – read
maj mood propertly, but not bound by maj. opinion 2)Ev. DE jumped through procedural hoops, applied local analog of rule
23, undertook examination, etc, before cert. class. Reconcile w/Hansberry by saying it stands for idea that ct overseeing
action must protect right of absent class members. Once it does that, assume no DP prob, esp. on coll. attack. Rendering ct
decided own DP limits – though McK says questionable whether good to allow rendering ct to judge for itself whether or not
its J violated DP.
ALI § 3.14 - supports this – favors direct appeal of class action settlement, not coll. estopp. ,which gums up the works.
Though Mck says danger of ct not doing great job superintending proceedings.
C. Settlement Design and Opt-Out Rights
In re Inter-op Hip Prosthesis – Med. device manufacturer sells pros. hips/defect, has to recall. Reqs med monitoring for
some Ps and surgery to replace parts in some patients. Settlement trust admins. monitoring/benefit fund – pays out in cash
and stock. 2 subclasses. No reversion to D, and money paid out not dependent on number of claimants. D also gives sec. int.
in assets for 6 years – Ds always essentially debtors, but lien structure odd. Very good deal here—why are there objectors?
1)ordinarily, if object to settlement, opt out, understand taking risk – here would benefit everyone else, and “top-up”
provision with liens kicks objecting claims behind those of members that stay in class. Effect is creates 23(b)(1)(b) lim. fund
mandatory class in the guise of a 23(b)(3) class. All assets pledged, so lim fund. 2)Is intent imp? Intent here to punish optouts 3)Takeaway – maybe no liens+top-up features. No reversion to D also annoyed claimants that wanted to opt out –
concern feature makes sure no money left over – if don’t participate, may be no other pot. Fund created independent of # of
claimants 4)Concern abt good deal seems odd – one Q under 23(e) is one of overall adequacy/fairness (ct supposed to assess
adequacy of settlement, make sure other CA reqs satisfied)– why cry abt the loss of an opt-out right? Is that worth more than
an objectively good deal? When is a deal too good? Imposs position for Ds/Ps – if settlement not good enough, won’t pass
muster, but can’t be too good 5)Notes case, GM Engine – opt out, lose fed law claim—much more mand. Ct found fed claims
so val. that effectively not an offer to settle but a penalty if didn’t accept. Can’t do that – still has to be freedom of
action/consent on part of class members. Not supposed to penalize exercising opt out 6)Fen phen cases – 3 pts to exercise
opt-out rights. If opt out after 2nd and 3rd pts, on back-end, lose right to pun dmgs. 3rd cir approves, but disaster – too many
opt-outs, waiver of pun dmg rights an insuff deterrent – juries can circumvent w/comp dmgs for PNS, etc. Deal redone, corp
puts more money on the table to get rid of this.
D. Cy Pres Distributions
- Comes out of trusts and estates law – if money can’t be used w/in literal terms of grant, ct tries to find distrib that is
closest as poss. to donor’s intent. Often litigated, bc if money not distrib., given to someone else.
- CA context – money often left in settlement/judgment pot – what do you do w/that?
- cases present exit voice/loyalty qs – inherent in any attempt to govern an organization. At bttom, q is whose money
is it—figure that out, figure out who controls it. Cts tend to do this instead of divide up unclaimed money amongst
claiming class members.
Six (6) Mexican Workers - Ds violate statute for hiring undocumented workers to pick crops. Award made per violation. Q
– how to identify class members? Ds argue no class bc fact that so many class members shows a)class unmanageable and
b)can’t use cy pres in this way – can’t be used to overcome manageability issues in CA and award itself untenable. Nature of
comp claims is deterrence/enforcement – stat specifies dmgs bc too hard to measure dmg to indiv of failure by D to abide by
state scheme. Opinion focuses on deterrence, but also bc can’t fix price pt for partic rights in many cases – ease of admin.
issues. Ct accepts that is stat dmgs case – manageability diff not abt adjud. right involved, just distribution 1)No superiority
problem – either revert unspent dmgs to govy/sovereign or revert money to Ds (defeat purpose of statute and deterrence
rationale)—don’t want wrongdoer to benefit from wrongdoing. Could do eschet – give to govy, but no real comp to P class
2)Leaves us with cy pres – but ct doesn’t like org funds distrib. too—too remote from P class, no sub. record of service. If
buy deterrence as purpose of statute, hard to argue that anything other than rev. to D is bad 3)Conc – stealing D money. Can’t
find Ps, by default, give Ds back money 4)McK says odd case, doesn’t touch on real concerns abt cy pres distribs – concern
abt ct and power of parties in playing with money that isn’t theirs. Concerns abt favored orgs getting a windfall from ct
5)Result here bc ct looks at function of CA in this context not as a compensatory scheme but a governance scheme designed
to deter certain conduct by D – on that like of reasoning, unclear whether eschit t ogovy, cp pres to class, etc, is better.
ALI § 3.07 and Comment b and Illustrations – says cy pres distribs should be restricted to situations where distrib to class
members would not be economically viable, and then only if parties can identify a recipient involving the same subject matter
as the lawsuit that reas. approximates the interests being pursued by the class
E. Attorney-Client Conflicts
Lazy Oil Co. v. Witco Corp – Settlement involving small oil producers – dispute over way diff class members comped.
Producers say diff interests/unique loss, deserve more comp. Some named class members don’t like the deal. Class counsel
repping disagreeing group – concern class counsel will use client secrets against counsel. Had been repping them, now
opposing them, might use secrets against them. Ct concerned w/countervailing consids – let objector have veto power, huge
ace in the whole – could ding class counsel just by arguing conflicted. Takeaway – class members can’t get rid of lawyer. Ct
won’t approve conflicting out of lawyer for class---seems odd, maj of both class members and named rep don’t want lawyers,
but ct won’t allow this kind of control. Why? 1)? If care abt class voice, etc. 2 realities – lawyer doing representing, not
named reps, but second practical answer – world in which objecting class member or named rep could boot lawyer – then
would give objectors a tremendous amt of power – concern objector would hold out for some amt of money or compensation,
and objector doesn’t care where it’s coming from – either D or P lawyers give them money. Lazy oil abt fear that objector
will do more than just voice some concern on merits—will do this to reap more comp.
VIII. Aggregation and Alternative Dispute Resolution
A. Class Arbitration
- Some scholars take position that arb. agreements that exclude class arb. effectively kill class actions in toto—Gilles
article. If can put everything into arb – future of CAs.
- Federal Arbitration Act (FAA), sec 2 – a written prov in a K evidencing a transaction involving commerce – to
settle a controversy between parties, shall be valid, irrevocable, and enforceable, except as on such grounds as exist
at law and equity for the revocation of K. Means parties don’t have to sign anything to send something to arbitration
– simply need writing in a K that evidences a transaction involving commerce
- Also applies to agreements to arb. that are entered into before a dispute arises. Before FAA, cts gen. allowed parties
to arb. after a case has arisen – priv. resolution of suit. FAA enacted to counter trad jud. hostility to predispute arb.
agreements. Theory of FAA/arbitration generally that parties allowed to choose to resolve their claims in a diff
forum. Parties choosing a diff forum in which to decide how their dispute will be resolved. Arb. clauses supposed to
be forum selection clauses. Law doesn’t go away – same substantive law, but instead of a judge, now a priv party,
mutually agreed upon by the parties, that will apply the law. FAA - judiciary involved at 2 stages – very beginning of
dispute, and very end. Some gatekeeping function at beginning – whether parties actually agreed to arbitrate this
disagreement. At back end, very lim. review of the result of the arbitration when deciding whether or not to enforce
the arbitration agreement. Party b first has to get judgment ordering the enforcement of the award. Sec 10 of the FAA
gives very limited grounds for challenging the enforcement of the award – unless can show that the product of fraud,
“manifest disregard,” etc – won’t be overturned. Recent 5th cir decision even held that manifest disregard not suff to
override arbitration award – circ split, but basically need to show actual fraud to challenge under the FAA
- some argue policy better for society writ large, and spares fed cts time of adjudicating matters.
- Orig – FAA statute contemplated to apply to maritime Ks, other big commercial Ks, etc – language very broad.
Statute from 1925 – narrower def of K prevailed. 1980s, dramatic expansion of FAA, pushed by SC – upholds
prearbitration agreement involving labor disputes, claims involving consumers, claims involving investment
agreements, etc. Ct also finds – biggest change in interp of FAA – that statute applies in state ct as well as fed ct.
Even if an agreement/K says governed by the law of a partic state, and even if a dispute between parties ends up in
state ct, if FAA invoked, statute must apply to the dispute. Important because many states have either by statute or
judicial opinion taken a much less sympathetic view of arbitration. Change bc of personnel changes to ct. Arbitration
seen as a cost effective, informal way to resolve disputes – very attractive to both the judiciary and members of the
SC – one view of lit in America that everyone would get along without litigation – makes parties more adversarial by
forcing ppl into this atmosphere with lawyers driven to hit each other. McK says too naïve. Most scholars more
worried abt/adhesion Ks/forum K arb. clauses
Green Tree – Corp fails to make disclosures to customers in sales of homes. Stat dmg. prov under SC law – arb awards 10s
of mills on classwide basis. Corp challenges this in ct. 2 qs: a)what did parties agree to in K? b)allocation of interpretive auth
– who decides what parties agreed to on this issue? SC SC says arb clauses in K silent as to whether arb. can take form of
class arb, and under those circs, SC law interprets K as permitting class arb 1)Breyer plurality vacates J – this is matter for
arbitrator to decide – remand so that q may be resolved in arb in the first instance, not cts. Says nothing in K prohibits
classwide arb. McK: Doesn’t FAA mean should favor classwide arb. whenever poss/unclear? 2)Rehnquist dissent – says
lang. clearly singular (Breyer says unclear whether singular or plural)—shouldn’t allow arb. on classwide basis. Want to rev
this. Q – if parties didn’t agree to arb on classwide basis, shouldn’t ct/gatekeeper decide on this? Substantive q, but q of
procedural issues – is that subject to the ct’s purview? 3)Breyer goes through carefully bc doesn’t think SC SC decision ran
afoul of FAA policy—doesn’t preempt this, but won’t affirm bc says ct shouldn’t determine what parties agreed to 4)Stevens
sides with Breyer, though he disagrees – ct revs judgments, not opinions—stevens wants to affirm. This is Q for state cts in
interpreting K, and corp didn’t explicitly challenge below the allocation of interpretive auth. 5)implicit rationale of this case
that this all abt procedure – and arb can set that. Most arb agreements allow 1-3 national arb. agreements to set rules 6)one
concern w/classwide arb – DP concerns supposed to be lessened by careful cert decision for CA lit, notice, etc—if leave to
arbitrator, can say by way of fiction that class has signed on to whatever he later decides to do? McK says if have classwide
arb, certain functions almost need to have ct as classwide oversee/decider, but Breyer disagrees – defers to arbitrator
decisions 7)Strong suggestion here that prob w/order of operations here, w/trial ct cert. class before sending to arb for
resolution, may have allowed ct to intrude too far into priv domain of arb. Ct supposed to only have lim front-end
gatekeeping role and lim back end enforcement role. McK says – how is arb supposed to work if arb has monopoly on adjud.
power? Who decides what const. suff. notice? How will class be cert? What are rules of cert? Can arbitrator read agreement
as concession that reg notice/DP protections reduce? Seems questionable. Perhaps Rehn dissent right for wrong reason—priv
ordering of arb. may be incompatible with public governance nature of class action – a creature of cts bc cts a creature of
govies, and class actions an extension of that. Classwide arb. may be an oxymoron –need govy in order to have a class action.
But maybe not 9)Many arb agreement challenges after this case brough under state unconscionability laws – FAA explicitly
says that arb agreement can be struck down on any ground applicable to any other K – any K common law. Mostly
procedural unconscionability.
B. Contractual Prohibition of Class Arbitration
In re American Express – Q here is how far can the party that drafts an adhesive arb. agreement go in removing the poss of
proceeding on a classwide basis? Post Green Tree, most agreements say not only no classwide arb, also written such that if
some other CA going on in cts, party cannot join in on the CA – only way to resolve dispute is by arb., and dispute resolved
on indiv basis. Here, Amex changes agreements w/merchants – tell them that if accept charge card also have to accept CC.
Arb agreement says that agree to arb and can change terms on notice at any time. Merchants sue, alleging req that take CC in
order to take charge card illegal tying agreement under antitrust laws. After prev case, is there even q here? 1)right to litigate
not explicitly taken away here. If CA only way to bring class, poss problematic. Ct relies on expert affidavit – antitrust lit
expensive, need to have CA to be econ. rational to undertake suit. Need experts, show mkt power, etc. No indiv P will pursue
this. Ps need to be able to vindicate rights. Statute allows for recoupment of expert fees, but insuff 2)Still, McK asks why this
truck down. Suggests that if arb terms an attempt to give party immunity from law, unlawful. No substantive right to CA, but
if under circs, suggestion that arb K an attempt to kill application of substantive law, then agreement is void. McK says
doesn’t always work out this way 3)Takeaway – provs that prohibit CA null/void in situations where we believe CAs nec as
governance device to check corp. misbehavior. Not same thing as when claims are of negative value – ct tries to come up
w/balancing test 4)How will this all play out? Corps want arb agreements bc they want immunity – this case ruling nice in
theory, but avoids reality of why businesses want to push agreements on customers. After this, amex says don’t want to arb
on classwide basis, prefer ct 5)Real q is always who pays costs. If arb. costs covered, maybe consumers better off. Maybe if
arb forum neutral and can take care of trans costs, corps won’t be as fervent to get out of cts and into arb. 6) Amex diff from
other challenges to these provs bc doesn’t rely on state law unconscionability consids – says case abt fed substantive law of
arbitrability. No substantive right to CA—procedural device ancillary to other substantive right, but attempt to prohibit class
treatment of dispute bw parties here so burdens vindication of fed substantive right (antitrust claim) that violates substantive
law. Policy-heavy decision, unclear how will play out in SC – wary of attacks on arb. clauses bc of strong fed policy in their
favor, but ct may recoil from idea that corps can free themselves of rights held by consumers by manipulating K terms
IX. Private Aggregations
A. Background
1. The Private Aggregator
Sprint – Lots of small payphone operators, long-distance carrier supposed to pay comp. for providing payphone. Allegation
that LDCs stiffing operators systematically bc of faults w/computer system meant to track this. Operators assign claims to
aggregator to bring suit on their behalf (for a fee), and remit proceeds of suits. DC cir says no priv right of action, revved by
SC. On remand, DC cir revs self, but LDCs have alt. arg that Ps have no art. 3 standing to bring suit. DC Cir disagrees, LDCs
app. to SC 1)Aggregator has to take title, but not entitlement to beneficial interest, to avoid concerns of champerty and
maintenance – where someone buys into another’s lawsuit. Just generic maintenance here 2)Breyer says historically, this is
fine, common practice. Easier to have leviathan aggregator than tons of operators here—easier to proceed/get them to
cooperate. If operator decides to discontinue suit, not allowed to terminate---allows aggregator to run lit 3)Standing reqs in
fed ct: a)injury in fact – invasion of legally protected right b)causation – injury in fact traceable to D conduct c)redressability
– injury can be remedied by relief in ct. Disagreement here over fact that aggregator wont retain anything from actual award
– breyer says redressability not an issue, q should be whether injury being redressed, not whether injury of person being
redressed. Diff b/w breyer and dissent – breyer willing to say that even though injury someone else’s and money will go to
them, bc assignment for collection purposes, no redressability issue here 4)Aggregator could’ve just bought claims outright,
but serves as operator rep – does this as service, not trying to make top dollar. If had bought claims outright, no art 3 standing
issues at all 5)Roberts dissent – very formalistic 6)No CA here bc of pitfalls – hard to have class rep – may not be
representative of class, etc – non-common issues may overwhelm common qs binding class together. Had tried to do this as
CA, but no cert bc of Qs abt sup. and dominance 7)De facto CA – prob? No rule 23 prots. for Ds/Ps, Breyer ignores. Also,
CA, comp. for fees among lawyers, but here, aggregator will be undercut by comps. if too greedy 8)Downside to Ds from this
structure – aggregator might be able to claim discovery docs, etc not w/in its control – related case req aggregator to get docs
from operators, but their cooperation was pathetic. Ds may also have trouble bringing counterclaims Breyer says no prob, just
join operators as parties using joinder under rule 19 (McK says unsure abt this) 9)McK says breyer’s pragmatic decision
underthought—art 3 standing args unpersuasive (hiding the ball). Roberts more formalistic abt standing rules—aggregator
has no stake in claim, only interest in showing world it does a good job providing these services--but also thinks this will
allow lots of addtl lit to go forward, whereas contrary rule would squash lit at outset. Also says maj’s claim that no art 3
standing issue might hurt them if real standing case arises – ct won’t be able to look back on this as real precedent 10)Outside
this case, lawyers might like priv agg. – fees a matter of K here, no real ct scrutiny
2. The Role of the Attorney
- Cts reg fee arrangement—consent to fee arrangement by class members pure fiction, despite disclosure
- What if aggregator separately repping a large inventory of Ps in tech. sep. cases against a common D – can he settle
all those claims at once? rule 1.8(g) – model rules of prof. responsibility. 4 reqs – 1)have to be involved in case
where atty repping 2 or more clients – threshold req 2)if multiple clients, must be informed consent of each client
before an agg. settlement3)that must be in writing and signed by client before the lawyer can participate and make an
aggregate settlement of the claims, evidencing informed consent 4)In so doing, the lawyer must disclose the
existence and nature of all claims involved, and the participation of each person in the settlement
- Rule excludes CAs, SH derivative suits, BK cases. Most of the lit. heat over sits. where have multiple Ps
- what must be disclosed to each P under 1.8g – must know what every other P getting from settlement—not just that
deal gen disclosed—participation of other parties disclosed, what other Ps getting, etc – runs smack into other duty
that binds lawyers, which is atty-client confidence. Prob with that—disclosure raises ethical qs about what a lawyer
can tell one client abt deal other client getting—cant just give settlement matrix. can always waive atty client priv,
but clients averse to doing that
- criticisms of rule: a)1.8g throws monkey wrench into works which leads to expense and delay b)leads to holdouts
c)leads to invasions of privacy of Ps bc of req disclosure of indiv Ps –hard to get waiver of atty client priv---all
d)leads to inability of Ds to get global peace, which means fewer deals done.
Jackson Hewitt – Allegation that tax prep service corp had breached franchise agreement with franchisees. Each of 154 sep.
franchises signs identical agreement w/lawyer that provides for democratic voting before settlement reached by a weighted
maj of Ps (by value of claim). Once have this, each indiv P agrees to be bound by terms of agreement—which also sets out
steering committee of Ps resp for procedural/strategic moves in case. Retainer also specifies formula tied to each Ps’ prop.
share of a settlement. All fully explained, assented to openly 1)Prob – don’t know terms of settlement when signed
agreement. Also, no jud rev of settlement – need for CAs to check atty loyalty/self-dealing—class assents ex post, not ex
ante. Concern that some parts of class sold out for others’ benefit. Literally met 1.8(g) reqs, but temporal question 2)Also,
this makes it too easy to do end run around CAs – puts pressure on same concerns that led to CAs in the first place 3)Might
elim. concerns by allowing class to consult w/outside lawyer before voting on settlement for x day window, but may not be
practical 4)Ps did this as agg. proceeding instead of CA bc franchise agreement prohibited CAs – term may not have been
enforceable, but intended to skirt K terms 5)What if req. mandatory approval for this to go forward? Holdout problem might
dissuade D from putting any money on the table. Savvy D might prefer class – don’t need 100% consent. D might also make
explicit threat – 100% participation or whole offer off the table 6)1.8(g) all about loyalty – debate turns on 2 diff schools of
thought on prof resp. – one trusts lawyers, thinks rules too rigid, one distrusts them. Goes to core of self-perception of
profession Same Anchem/Ortiz concern about lawyers selling out one group of litigants to benefit another if will raise
recovery, esp wrt future/present litigants
ALI § 3.17 and Comments a & b – Calls for allowing advance waivers/altering 1.8(g). Very controversial – concern that
attacking this rule means attacking basic req. that when I sign on as lawyer, lawyer will be loyal to me and me alone
B. Aggregate Settlements
1. Quasi-Class Actions
In re Zyprexa – Eli Lilly promotes off-label use of schizophrenia drug, causes issues. Judge appoints special masters to
oversee global settlement paid out to diff tracts. Also told them to come up w/fee sched. to allocate fees/lit expenses. Orig.
40% contingency fee (seems high bc attys have large inventories of cases, economies of scale). This not a CA, an MDL
action 1)Claims quasi-CA(not CA, so no 23(e) review powers over settlement/class counsel comp) – has supervisory power
through code of ethics to oversee this, even absent party challenge. A gen. “do right” power to supervise lawyers, though no
rule authorizing this. No Ps object to this, why do this? Ct has int. in maintaining legal profession’s rep. Is there a limiting
principle? Primary concern perhaps abt contingent fees – can be massive, and often decoupled from actual work put into case.
Think hourly fees = gen. some amt of time/effort/skill. Client won’t pay unless lawyer has exceptional skill, deserves fees.
Contingent fees – massive variability, and lottery conception – client doesn’t sign off on comp, may not know they are
overcomped. Interesting, those on hook for contingent fees are consumers/unsophis. parties, hourly fes – sophisticated parties
– unsophis parties prob couldn’t discern proper comp lvl ex ante 2)Argument this is punishment of P bar—weinstein says
responding to pub. disgust at overly large fees – is this legitimate? Why make slight adjustments when public won’t
know/care? 3)If someone needs to do this, why not send to other cts for a detailed review of retainer agreement? He draws
analogy to CAs bc they req strong supervision by ct – and same situation here – already doing everything in CA, why not go
all the way. Allowed to do this in CA context, why not for quasi-class action? 4)Defining this type of action – large inventory
of Ps w/small number of lawyers repping them, w/out strictures of rule 23. Need some lvl of ct oversight. Guidelines given
unclear – every fed judge managerial nowadays. Maybe in situations where conflict b/w lawyer and client, but preexisting K
arrangement lessens that to some extent. Poss also factor when have a handful of attys with a large inventory of clients who
are almost identically situated—might have conflicts. Basically any agg. of clients w/small number of attys can justify quasiCA5)Maybe attys already used to this—never appealed. This may lead to less variance in fee awards for big P firms and
already accustomed to oversight – easy to replicate documentation used in CAs, and incentive for P lawyer to keep good
records. Downside – maybe limits sophist. parties’ K arrangements w/lawyers – they don’t need oversight. Only
consumers/unsophis. parties. Is external governance rationale persuasive? Might argue if going to have quasi-CAs, only
differ from real CA for cert. – still concerns with large collectives having interests compromised w/out greater jud scrutiny
6)MDL panel and other cts quickly pick up on this 7)Danger w/case is that blurs line b/w CAs and other lit. Something to
assertion of inherent auth. to regulate the bar, but remember Taylor v. Sturgell – ct wanted to keep lines clear to avoid
confusion/avoid free-floating rule of exclusion
2. Bellwether Trials
- Simple concept in theory – some number of claimants have cases tried, and based on results of selected trials,
further settlement negs. are determined. Precise procedures for their application more difficult.
- hard edge preclusion bellwether proceedings– sample cases, decide common issues in way that will bind everyone
- soft edge preclusion bellwether proceedings – provide info used for future settlement negs
In re Chevron USA, Inc. – Settlement built on land corp. used as waste oil storage, said to contaminate drinking water,
cause injuries/death. Judge wants bellwether trial of sorts – Ps get to pick 15 best claims, Ds pick 15 worst claims (out of 3K
claims) 1)Revved after CoA grants mandamus - probs – expert would’ve chosen random sample w/enough pts for higher
confidence interval – generate real curve w/meaningful info for purpose of settlement negs. This gives info, but not that
helpful. Adversarial selection of cases will lead to skewed representation. Not real bellwethers/representative of class as a
whole. Must have inferential stat. sampling for selection, or no bellwether trial. At best, procedures here would give
endpoints, but not much in middle, and not much sense of what partic variables worth—need grid-like schema. Attempting to
replicate maturation process over time, need to be precise, and McK skeptical whether can completely replication infoproducing function of maturation of mass tort – trial and error, diff liab theories, etc, in quick-time bellwether 2)No real plan
of attack here – no plan, no common issues, no explanation for how trials will resolve things for remaining Ps. Doesn’t
identify variables learned by proceedings – valuation of property claims, history behind claims, sense of causation wrt
personal injury claims, etc 3)Non-elastic mass tort – fixed, ascertainable class size/known universe-- not as much concern
with future claimants as with elastic torts, but not as big of a maturation period (everyone in ct at once), which can give info
about value of claims. Hard to mimic learning that occurs as elastic tort matures, even with a bellwether trial, though design
can help alleviate some concerns, and for non-elastic tort, may make more sense to use bellwether process right off the bat
4)Why not have 3proceedings at once w/3 diff juries? Better, but costly, defeats some purposes of bellwether trials to being
with 5)Why would D object to this? Sim. to Rome-Polanque fear – elements of randomness/risk in small number of trials –
raises specter of high variance for D 6)Preclusion issue with bellwethers – P not party to prev lawsuit, so no preclusion, but
issues for D 7)Lawmaking function of bellwethers – even if not technically preclusive, have effects down the line. Hilao –
not only sampling, but opt-in for Ps – perhaps better than info-gathering here where not clear whether there is hard-edged
preclusion or soft edged preclusion. One idea is to force opt-in for bellwether trial – get benefit of soft-edged info gathering
and preclusive effect of hard-edged format 8)As indiv, preference depends on perception of strength of claims – opt in, claim
resolved more quickly. If wait, see what comes out of proceeding, might get more, but time issue. Also concern w/aggregate
lit – don’t have much control. But if rational, know that bellwether trial will affect your settlement value either way – join in
bc might get paid sooner. Matrix generated will have enormous effect on all future settlements, and not hard-edged precluded
on issues resolved in this proceeding 9)dissent – concern w/bellwether trials in general – fairness, having day in ct, etc.
Rome-Polanque concern for Ds, but also for ct – stat. sampling looks like creating leg./leg. role. However, soft-edged case
doesn’t even bind Ps – just sets table for parties if they wish – McK says her leg.-concern is a bit overstated. Proceedings as
parker conceives – lim. hard-edged preclusion, some soft-edge preclusion for information process – helps parties resolve
cases out of ct. Some leg elements, but not pure leg. Bellwether trials broader than usual creation of law by filling in
interstices related to defined areas of law – fixing universal norms more than adjudicating on precise facts.
AGREEMENTS WITH PLAINTIFFS’ FIRMS

Vioxx Settlement (2007)
o Facts:
 Merck’s widely prescribed painkiller increased risk of heart attack and stroke, had been evidence in
clinical trials. Failed attempt at class certification. Initially, everyone thought Merck would file for
bankruptcy, but took “Churchhillian” approach and said they were going to fight everything.
 Bellwether trials -- 16 cases go to trial. Ps win 5, Ds win 7. Damages not that big in losing trials.
Forced maturation; made it hard for Ps to show causation in aggregate applied in their individual
cases and lots of Ps already in bad shape.
 Ps sue for peace. Settlement agreement signed between Merck and counsel for Ps. Fairly small # of
lawyers have most of the Ps. 85% sign on.
o Settlement Agreement
 Settlement not between Ps and D -- between D and lawyers for Ps.
 Merck pays and Ps’ lawyers supposed to recommend to all of their clients that they accept the
settlement, which comes with the implicit threat that the lawyer will fire the client if they don’t go
along. Scary letter.
 Judicial supervision of fees in agreement.
o Analysis
 Debate over settlement.
 Settlement a betrayal of fundamental principles of legal profession
o violation of duty of loyalty to the client because the lawyers for Ps not acting in the
interest of each individual client. Instead, this is a stylized way to get around Rule
1.8g.
o More systematic view that this violates the required independence of lawyers – a
breach of duty of P lawyers to act independently, to guard their judgment from being
corrupted by persons outside attorney-client rel. Settlement directs lawyers to take
certain actions.
 But it’s impossible for any aggregate litigation to expect rules of professional responsibility
to function in the same way. Rules are written with traditional 1 to 1 litigation in mind,
won’t work here. And this dispute had to be treated in the aggregate somehow, Merck
couldn’t litigate everything.
 Role of the Court
 Parties play up the private nature of the agreement, but clear arrangement is
shepherded/shaped by MDL judge and other judges overseeing state litigation. Judge also
decided attorney’s fees – done under conceit that judge being asked to do so by parties –
formalized in settlement agreement.
 Administration of settlement – Ps put in for compensation, determined by complicated formula that
takes into account usage history, health history, family history, etc—points system.
 Case treated as a non-elastic tort. Both sides have a sense early on about universe of claims, because
drug off the market and statute of limitations ran for most claims.
 This setup wouldn’t work as well with elastic torts. As long as solvent D, no guarantee
future claimants won’t show up down the line and sue you. Unlike here, in most states can
sue for asbestos injuries whenever they manifest, years after exposure. Here, SOLs ran and
clear that injuries manifested fairly quickly.
 Asbestos the far outlier – huge elasticity. Might have intermediary torts – 10 yr latency
period, but then very quick and certain manifestation. Not entirely clear—need some sense
of the entire universe. No preclusion going on here. Not like a class action in which adequate
representation used to bind people not before the court. Need to have pretty close to the
entire universe in front of you to do this
ADMINISTRATION OF SETTLEMENTS

In re Orthopedic Bone Screw Products Liability Litigation (3rd Cir. 2001)
o Facts:
 Ps bring products liability claims against manufacturers of defective bone screws. Limited fund class
action under 23(b)(1) (certified pre-Ortiz, probably would not pass.) Ds pay $100 million and
insurance proceeds into a fund to be divided among plaintiffs.
 Settlement administration deadlines: registration deadline in 1997 with basic information, proof of
claim deadline in 1999 with detailed information.


P in Puerto Rico, where publication notice only on page 50 of newspaper. No question no actual or
constructive notice. Missed registration deadline, then talks to lawyer who informs him of
settlement. Registration late, proof of claim on time.
 Claim administrator originally had plan to dock late filers by 20%. DC didn’t approve – wanted to
set universe of potential claims?
o Holding:
 The District Court abused its discretion when it misapplied the “excusable neglect” standard and
refused to use its equitable authority under rule 23 to include Sambolin’s claim.
o Analysis:
 COA applies four factor test for “excusable neglect”:
 Prejudice to nonmovant
o D paying a fixed amount, doesn’t care. Would be different in an opt-out class,
because liability of D wouldn’t be fixed.
o Ps lawyers oppose, because will dilute claims of timely filers. Court: this is a
windfall, no reason they should get more than claimant here.
 Length of delay
o 7th months late, didn’t affect anything. Registration deadline serves nontrivial
purpose of setting universe of claims, but here, administrative scheme could
compensate, distribution pending.
 Reason for delay
o Nobody did anything impermissible with notice, but claimant here was diligent,
blameless.
 Good faith.
o No ev of lack of good faith.
 Troy:
 Outcome here not driven by four factors, but by lack of notice and fact that D’s liability
fixed.
 This case is also a warning that DC can’t completely get out of the process of sorting
through individual claims. 3rd Cir. seemed annoyed that DC entered a bulk order. Not that
many claims, wouldn’t be overwhelmed with objectors. But 100 – could still be a lot. Except
here, individual determinations not complicated, D will have the same objection to each.
Will be pretty cookie-cutter application. Fear of 1000s of claimants coming along not
enough to justify bulk treatment.
o Might be different at proof of claim stage.
Pigford v. Johanns (D.C. Cir. 2005).
o Facts:
 Class action against the Department of Agriculture by a group of black farmers, alleging
discrimination in administration of benefit programs.
 Settlement: two tracks for relief. Track A -- $50K in recovery with little proof. Track B – no limits
on recovery, but with tougher standard to show discrimination.
 It becomes clear that the number of Ps was grossly underestimated, administrative scheme
overwhelmed, lots of claims denied. To get review of a denied claim, had to file by a certain
deadline.
o Holding:
 D.C. Circuit upheld denial of late-filed petitioner of review of denied claims.
o Analysis:
 Two potential grounds for relief:
 Reopening judgment on grounds of changed circumstances
o No changed circumstances. Fact that plaintiffs had been underestimated was obvious
before settlement deadlines agreed upon by parties.
 Excusable neglect (like Bone Screw)
o Prejudice to defendant – will cost the government extra money.
o Reason for delay: This is the plaintiff’s own fault, they signed off on these
deadlines.
 Dissent:
 Majority failed to separate out the actions of claims from the actions of their lawyers. Court
has a duty to protect claimants. Can’t sit back and let lawyers run everything.

Troy:



Main problem here: poorly designed admin scheme for dealing with individual Ps seeking
relief under settlement. Step of initial registration something of an afterthought – if that
process had been set up from the beginning like Bone Screw, might have given more notice
earlier about the kind of admin system needed to be set up to deal with the high volume of
claims.
Not much attention here paid to standard of recovery – required a jury-like determination
about the merits of individual claims. Track A meant to be permissive, but wasn’t in
practice, because very difficult to prove discrimination, even with substantial evidence.
Vioxx structure might have worked better. Instead of asking P to prove, come up with x
number of factors that can be objectively proved or disproved, and grant bonus pts or
demerits depending on whether p can prove factors – get lessening of amount of line
drawing you need to undertake, and make it easier to do ultimate review of admin decisions
that come out of scheme.
Real difference between Pigford and Bone Screw is the courts view of the administration of
settlements.
o Bonescrew seems to adhere to a view a strong role for the court in administering
settlements. Court supposed to remain a strong fiduciary to the claimants – wouldn’t
matter if lawyers sloppy or otherwise overwhelmed – court cannot abdicate duty to
claimants simply because administrative structure set up.
o Pigford court recognize that at some point, court has to step back and let things run
their course, cant step in when small problems arise. No surprise that this case
comes out of dc cir – strong flavor of deference to administrative decision-making.
BANKRUPTCY
THE MASS TORT BANKRUPTCY AND 524(g)
 Chapter 11 Reorganization
o Came out of the recognition that its better to leave as a continuing enterprise. Going concern value meant
more recovery for creditors.
o Debtor has plan of organization set by judicially approved decree. Debtor-in-possession now owes duties to
creditors, not just to stockholders. Debtors can get protection without firing managers. Allows breathing
space, because when bankruptcy filed, all debtor’s assets transformed into an estate and all proceedings
against it halted immediately
o Voting rule: For each class of creditors, need 1/2 of claims by number and 2/3 by amount in order to
approve plan of bankruptcy
o Cramdown: If a class of creditors not getting 100 cents on the dollar, called an impaired class. If you’re in an
impaired class and you don’t vote for the plan, the court can still approve the plan over the objection of the
impaired class, so long as the plan is fair, equitable, and doesn’t discriminate against the impaired class.
1129b.
o Have to show a creditor would do better under a plan of reorganization than they would do if the debtor were
liquidated.
 Advantages of Chapter 11
o Main argument that rarely true that going concern value of firm high enough to justify reorganization over
liquidation—argue better to auction off firm so that more economically savvy firms can use pieces more
effectively.
 Contractarian view – reorganization gives lots of power to debtors – in doing so, upsets consensual
arrangements—principally the contract obligation of debtors to pay creditors.
 Process too expensive – lawyers paid first, etc. Might be some benefits, but benefits swamped by
cost of running the show. many opportunities for notice and hearing good in some respects, but very
expensive.
 Chapter 11 a job-saving device, but not a good one – better off with a stronger social insurance
scheme, rather than spending money to save economically moribund firms
o None of those objections applies in the mass tort bankruptcy context
 Tort claimants are non-consensual creditors, no contracts at issue. Not disrupting any party bargains
 Cost of bankruptcy high – but in mass tort context, litigation outside of bankruptcy is very expensive
as well.


Most corps in this situation pretty profitable, like Manville—not poorly run, they understand market,
follow core competencies, etc, sound earnings, but massive liabilities as legacy of past
manufacturing activities – may make a lot of sense for similarly situated corps.
o Other advantages of bankruptcy in mass tort litigation.
 Provides a powerful judicial hook for mass litigation – bankruptcy code provides for removal of
many actions to jurisdiction where bankruptcy court sits—not unlimited power, but bankruptcy judge
has tremendous amt of power to run show because of automatic stay.
 Also a great space for creditor-debtor negotiation. Bargaining in the shadow of the law different in
bankruptcy context because of cramdown provisions. Creditors can try to drive hard bargain, but at
some point, can be overridden—diminishes greatly the problem of the holdout who tries to get top
dollar before signing on to the deal.
Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.)(2d. Cir. 1988)
o Facts:
 Manville biggest manufacturer of asbestos. Profitable as a going concern, but enormous personal
injury liability.
 Classes: administrative, secured claims, property damage, tort claims.
 Unusual features:
 Channeling injunction, all claims go to trust.
 Usual setup: require creditors to file a proof of claim, bar date deadline. Proof of claim
presumed to be valid unless an objection to the proof of claim. Slow process to work through
objections before claims deemed “allowed.” Only allowed claims can vote.
 Here: Judge gets around futures problem (HOW?) and doesn’t determine whether claims are
allowed or their value. Assigns $1 voting to each.
 Plan passes at 1/2/2/3 hearing. 52K claimants show up, 95% vote in favor.
 Kane objects.
 Violates rights asbestos future claimants who don’t have claims within meaning of
bankruptcy code.
o Future claimants won’t be able to sue corporation directly, trust is going to run out
of money.
 Voting procedure
 Lack of good faith/not in best interest of creditors.
o Holding:
 Kane doesn’t have standing under the bankruptcy code to make objections on behalf of future
asbestos victims.
 Voting procedure, even if erroneous, was harmless error because outcome wouldn’t have been
different.
 Bankruptcy court entitled to deference on good faith of plan – plan could have been crammed down
anyway despite objections.
o Analysis:
 Kane’s real argument is that the trust is going to run out of money.
 Court says he lacks standing to assert rights of futures. Gamesmanship dangers of allowing someone
with potentially opposed interests to object. Anchem-ish.
o Troy:
 System pretty well thought through for putting together a viable, long-term payment mechanism for
paying future claimants, but fell apart because too many claimants and not enough money. Lots of
time spent on structuring financials of settlement trust, not enough time was spent on the
administrative mechanism of dealing with claims. First-in, first-out system. encouraged speedy
filing.
 By 1989, trust forced to defend 89k suits, way higher than expected. Also, if claimant didn’t get
settlement offer w/in 120 days, could go to court, costs go up. Trust has to be restructured several
times. Part of restructuring – no more guarantee will get 100 cents/dollar on claim.
 Procedure used here eventually codified in 524g.
THE LIMITS OF MASS RESOLUTION IN BANKRUPTCY
CLASS SETTLEMENTS AND PRE-PACKAGED BANKRUPTCIES

In re Combustion Engineering (3rd Cir. 2004)
o
o
o
o
Facts:
 Rise of prepackaged bankruptcy – parties work out plan and present it to the court. Can enter and
exit bankruptcy quickly. Cheaper than court-centered bankruptcy.
 ABB acquires corporations, get wave of asbestos liability. ABB LTD owns US ABB owns CE,
Lummus, and Basic.
 Pre-pack has odd structure
 Settlement Trust: contributed to by several of these corps. Technically open to everyone, but
real intent is to pay present asbestos complainants who had filed a claim before bankruptcy
petition. At most will pay 95% of their claims, some get much less. Received “stub claims”
to recover in bankruptcy, allowed them to vote.
 Asbestos Personal Injury Trust: funded by another few of these corps---get benefit of
channeling injunction. FOR LATER CLAIMANTS?
 Structure voted on and approved.
 Subsidiaries Lummus and Basic not in bankruptcy, but they are covered by the channeling
injunction. Bankruptcy court can’t just 524g, because don’t have derivative liability, but under 105a
— general grant of equitable power to bankruptcy courts.
 There was a futures rep in this case (but veiled suggestion of disloyalty).
Objections:
 Can’t use 105a to circumvent 524g.
 Two trust structure provides CE Settlement Trust participants with preferential treatment over nonparticipant and future asbestos personal injury claimants.
 547(b) – can’t favor one group of creditors by transferring property shortly before filling for
bankruptcy.
 Voting procedure: the favored debtors weren’t completely paid off – received stub claims that
allowed them to vote to ratify the plan.
Holding:
 Use of 105a to issue channeling injunction to benefit non-debtors.
 Pre-petition payment of claimants from Settlement Trust invalid under 547(b). Creditors got more
than they would have gotten under if CE had been in bankruptcy.
 Remand to decide if stub claim procedure used here was an “artificial impairment” under
1129(a)(10).
Analysis
 CE tests whether Anchem and Ortiz were Rule 23 cases or whether cases rest on deeper principles.
Anchem and Ortiz reflect the concern that Rule 23 was being bent out of proportion in order to
justify the ends. Here, similar concern with bankruptcy code. Even when not in Rule 23, doesn’t
mean certain basic principles no longer apply. Question here is how far consensual arrangements put
together by lawyers representing Ps and Ds in aggregate resolution go towards achieving global
peace in mass tort
 Troy: On the one hand, flexibility was one of the hallmarks of modern bankruptcy code – supposed
to provide basic structure for rehabbing debtors. But fear in Anchem and Ortiz that approval of plans

would allow for essentially legislative solution – same fear here-- approval of pre-pack will allow ct
to essentially do the same thing.
But real problem: CE didn’t set up a particularly rational process for resolving asbestos liability.
 Those who were the most seriously injured were not getting the greatest guaranteed recovery
– many claimants getting top dollar for claims did not have the most serious injuries. Some
claimants shoved into the second trust had cancer but not get top dollar like previous trust. If
price for global peace betrays basic rationales for just compensation—maybe not a good
thing
 Ultimately, opinion too formalist. All of this would be acceptable if it had lead to a rational
plan for compensating claimants. When you have a futures rep, have a somewhat
adventurous use of a channeling injunction, but one that can ultimately be argued will
benefit the trust—not so sure should be so concerned about departing from the usual process
of bankruptcy.
PARTIES BOUND AND BENEFITTED
 In re Johns-Manville Corp., (2d Cir. 2008) cert. granted sub nom The Travelers Indemnity Co. v. Bailey
o Facts:
 Long history of Manville bankruptcy settlement.
 1986 order enjoins all suits against the settling insurance companies that “arise out of” or “relate to”
Manville.
 Issue now: Ps want to bring a claim directly against Manville’s insurer Travelers for independent
misconduct when learning of and then covering up seriousness of asbestos liability.
 Bankruptcy court issues clarifying order stating that those direct action lawsuits are barred by the
1986 order.
o Holding:
 The bankruptcy court was without subject-matter jurisdiction to enjoin claims brought against a
third-party non-debtor that do not directly affect the res of the bankruptcy estate.
o Analysis:
 Looks to prior case law and 524g language to establish that channeling injunctions require some
derivative liability. Unless confident that cases here derivative and would affective estate of debtor,
no channeling injunction. Implicit assumption that Travelers doesn’t have a claim for indemnity
against Manville. Troy: not sure about this.
 Troy: Paying token amount of money into the trust and paying claimants from there
probably wouldn’t cure this, although a better argument. Not sure why that didn’t happen.
nd
 2 Circuit a bit unclear but suggests that if the bankruptcy court had tried to do this in 1986, it would
have been impermissible.
 Troy:
 This is “related to” in the literal sense, but 2nd Cir. doesn’t want to go that far. One concern
with stretching bankruptcy too far to protect non-debtors – don’t want non-debtors to reap
the benefits without having to go through the costs. But. how do we limit this? Pretty good
argument that Mannville bankruptcy couldn’t have succeeded without participation of
Travelers.
 Is there something about the All Writs Act and the Anti-Injunction Act that are different
from SMJ under bankruptcy code? Bankruptcy courts have limited jurisdiction, even though
they are a court of last resort. Troy: thinks bankruptcy courts have greater power to squash
competing litigation than a federal court outside of bankruptcy.
o Concerns about this use of bankruptcy?
 No real futures problem. Everyone already in the boat suing the trust, no present vs. futures problem.
 Legitimacy stronger argument here. The bankruptcy court is operating at the margins of the code
using 105. The fact that ct couches discussion in terms of jurisdiction is really irrelevant. Really
about non-debtors benefitted from bankruptcy without filing.
 But Lifland got away with it before, 524g crafted to conform to prior decisions. Undercut
legitimacy problem? Can literally read 524g to allow this, but most agree that what he did
not contemplated by Congress in crafting 524g.
 Also, why no joint tortfeasor argument for derivative liability?
 Real concern: irrationality of recovery. Direct action claims are worthless – Travelers just paying to
avoid future defense costs, and that money not going to Mannville trust. If Travelers is paying
anything, pay to Mannville trust. Who cares if direct action Ps get anything if Travelers funding
trust? Overlap among trust Ps and Ps here. Best justification for decision 2nd Cir. reaches.